UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Year Ended December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                to


Commission file number 000-30135



VALUECLICK, INC.(Exact name of registrant as specified in its charter)

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

77-0495335(I.R.S. Employer Identification No.)30699 RUSSELL RANCH ROAD, SUITE 250
WESTLAKE VILLAGE, CALIFORNIA 91362(Address of principal executive offices, including zip code)Registrant's Telephone Number, Including Area Code: (818) 575-4500Securities registered pursuant to Section 12(b) of the Act:




Title of each class

Name of each exchange on which registeredCommon Stock, $0.001 par value

NASDAQ Global Select Market


Securities registered pursuant to Section 12(g) of the Act:
Series A Junior Participating Preferred Stock Purchase Rights



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes o    No ý

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer" and"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of June 30, 2008, which was the last business day of the registrant's most recently completed second fiscal quarter, the approximate aggregate market
value of voting stock held by non-affiliates of the registrant was $1,438,605,974 (based upon the closing price for shares of the registrant's Common Stock as reported by the NASDAQ Global
Select Market as of that date). As of February 20, 2009, there were 86,752,164 shares of the registrant's Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2009 Annual Meeting of the Stockholders (the "Proxy Statement"), to be filed within 120 days of
the end of the fiscal year ended December 31, 2008, are incorporated by reference in Part III hereof.



---





Table of Contents



VALUECLICK, INC.  ANNUAL REPORT ON FORM 10-K  TABLE OF CONTENTS

PagePART I

1ITEM 1.

BUSINESS

1ITEM 1A.

RISK FACTORS

10ITEM 1B.

UNRESOLVED STAFF COMMENTS

22ITEM 2.

PROPERTIES

22ITEM 3.

LEGAL PROCEEDINGS

22ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

24PART II

25ITEM 5.

MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

25ITEM 6.

SELECTED FINANCIAL DATA

28ITEM 7.

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

32ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

51ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

52ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

52ITEM 9A.

CONTROLS AND PROCEDURES

52ITEM 9B.

OTHER INFORMATION

53PART III

54ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

54ITEM 11.

EXECUTIVE COMPENSATION

54ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

54ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

54ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

54PART IV

55ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

55SIGNATURESCERTIFICATION OF CEOSarbanes-Oxley Act Section 302CERTIFICATION OF CFOSarbanes-Oxley Act Section 302CERTIFICATION OF CEOSarbanes-Oxley Act Section 906CERTIFICATION OF CFOSarbanes-Oxley Act Section 906


This annual report on Form 10-K ("Report"), including information incorporated herein by reference, contains "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. These statements relate to expectations concerning
matters that are not historical facts. Words such as "projects," "believes," "anticipates," "will," "estimate," "plans," "expects," "intends," and similar words and expressions are intended to
identify forward-looking statements. Although we believe that such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. Important language
regarding factors which could cause actual results to differ materially from such expectations are disclosed in this Report, including without limitation under the caption "Risk Factors" beginning on
page 10 of this Report and in the other documents we file, from time to time, with the Securities and Exchange Commission, including our annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K. All forward-looking statements attributable to ValueClick, Inc. are expressly
qualified in their entirety by such language. We undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.

---





Table of Contents

PART I.

ITEM 1.    BUSINESS

OVERVIEW

ValueClick is one of the world's largest and most comprehensive online marketing services companies. We sell targeted and measurable
online advertising campaigns and programs for advertisers and advertising agency customers, generating qualified customer leads, online sales and increased brand recognition on their behalf with large
numbers of online consumers.

Our
customers are primarily direct marketers, brand advertisers and the advertising agencies that service these groups. The proposition we offer our customers includes: one of the
industry's broadest online marketing services portfoliosincluding performance-based campaigns and programs where marketers only pay for advertising when it generates a customer lead or
product sale; our ability to target campaigns to reach the online consumers our customers are most interested in; and the scale at which we can deliver results for online advertising campaigns.
Additionally, our networks of online publishers provide advertisers with a cost-effective and complementary source of online consumers relative to online portals and other large website
publishers. Through this approach we have become an industry leader in generating qualified customer leads and online sales for advertisers.

We
generate the audiences for our advertisers' campaigns primarily through networks of third-party websites, other online publisher partners and search engines. We aggregate our
publisher partners' online advertising inventory into networks, optimize these networks for specific marketing goals, and deliver the campaigns across the appropriate networks' advertising inventory.
We are one of the industry's largest online network providers, with: industry expertise and proprietary technology platforms for online advertising inventory aggregation; campaign targeting and
optimization, delivery, measurement, and reporting; and, payment settlement and delivery services.

Our
publisher partners enjoy efficient and effective monetization of their online advertising inventory through representation by our direct sales teams in major U.S. and European media
markets, participation in large-scale advertiser and advertising agency campaigns they may not have access to on their own, enhanced monetization through our proprietary campaign optimization and
targeting technology, and settlement services to facilitate payments to publishers for the online inventory utilized by the advertisers. As we do not primarily own and operate websites that compete
directly with our publisher partners for online consumers, we act as a trusted partner in helping online publishers monetize their online audience and advertising inventory.

We
believe that the effectiveness of our online marketing services is dependent on the quality of our networks and our publisher partner relationships. As such, we have established
stringent quality standards that include publisher rejection from our networks due to inappropriate content, illegal activity and fraudulent clicking activity, among other criteria. We enforce these
quality standards using a combination of manual and automated auditing processes that continually monitor and review both website content and adherence to advertiser campaign specifications.

We
derive our revenue from four business segments. These business segments are presented on a worldwide basis and include Media, Affiliate Marketing, Comparison Shopping & Search,
and Technology, which are described in more detail below. For information regarding the operating performance and total assets of these segments, see Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and note 17 "Segments and Geographic Information" to the December 31, 2008 consolidated financial statements included herein.

1

---



Table of Contents

MEDIA SEGMENT

ValueClick's Media segment provides a comprehensive suite of online marketing services and tailored programs that help marketers create
and increase awareness for their products and brands, attract visitors and generate leads and sales through the Internet. We have increased the scale of our Media segment over the years organically
and through the acquisition of complementary businesses. Our strategic expansion and subsequent integration within the Media segment has increased our presence in interactive marketing with powerful
offerings to advertiser and advertising agency customers in the following product categories:



We provide marketers with access to one of the largest and most reputable display advertising networks in the industry where we partner
with third-party website publishers and apply our proprietary technology platform and industry expertise to deliver our customers' display ad campaigns to the appropriate pages of our publisher
partners' websites.

With
a single buy, marketers can reach targeted online users on a large scale, using a variety of online display ad units across our entire network of publishers, any of
21 standard channels of online content within the network, customized content channels, or a select number of websites where we are authorized to sell inventory on a single-site
basis. Audiences can be further targeted based on the demographic and psychographic composition of sites within the network and technical information such as geographic location, browser type,
connection speed, ISP or top-level domain (.com,.edu, etc.). Our behavioral targeting capabilities allow marketers to retarget users who have recently visited their sites or to display
highly relevant ads based on
anonymous profiles we develop based on consumers' recent online behavior such as web browsing and interaction with ads across our network.

With
15,000 active online publisher sites in the U.S. and 20,000 worldwide, our display advertising network reached 159 million unique visitors, or 83% of the
U.S. internet audience in December 2008 according to published industry data.

We
deliver a variety of display ad units to the Web pages of our online display advertising network publisher partners and track them to evaluate success against the goals of the
advertising programs. With traditional banner ads, interstitials, text links, and other online ad units, our technology maximizes the impact of marketing campaigns by identifying the most effective
placement for each type of campaign. We also execute a wide variety of rich media applications, including in-stream and in-banner video ads, providing even greater visual and
auditory impact for a marketer's online display advertising campaigns.

We
began as a performance-based marketing network and we continue to offer multiple pricing models designed around maximizing our customers' return on investment. Our display advertising
placements are offered on several pricing models including: cost-per-thousand-impression ("CPM"), whereby our customers pay based on the number of times the target audience is
exposed to the advertisement; cost-per-click ("CPC"), whereby payment is triggered only when an interested individual clicks on our customer's advertisement; and
cost-per-action ("CPA"); whereby payment is triggered only when a specific, pre-defined action is performed by an online consumer. As discussed in "Lead Generation
Marketing" below, we also sell display ads on a cost-per-lead ("CPL") basis.

The
benefits that our customers enjoy in display and other Web advertising include, but are not limited to: flexible pricing models; the ability to target and reach significant numbers
of online consumers in a way that complements media buys on portals and other large websites; and the ability to improve online advertising performance while the campaigns are still running by
optimizing at site, placement and creative levels, based on both response to ads and the resulting conversions.

2

---



Table of Contents

Publishers
in our display advertising network enjoy efficient and effective monetization of their online advertising inventory, including: representation by our direct sales teams in
major U.S. and European media markets; participation in large-scale advertiser and advertising agency campaigns they may not be able to access on their own; enhanced monetization through our campaign
optimization technology; and, settlement services to facilitate payments to publishers for the inventory utilized by the advertisers.
Through our proprietary publisher interface, publishers can control their participation in campaigns as well as their minimum acceptable level of revenue on an effective-CPM basis.



In our lead generation marketing services, through our proprietary technology platforms, we manage online campaigns that generate
qualified customer inquiries for an advertiser's product or service. An online consumer generates a qualified customer inquiry when he or she responds to the advertiser's offer by providing some
personal information (such as their email address, phone number and/or mailing address) and requesting to be contacted by the advertiser. Lead generation advertiser customers only pay us when an
online consumer signs up for an advertiser offer or opts in to being contacted by the advertiser.

We
utilize a number of methods to distribute advertiser lead generation offers, including:





Prior to October 2008, we sold a limited number of consumer products directly to end-user customers through a small
number of Company-owned e-commerce websites. We entered this business through the acquisition of HiSpeed Media in 2003, and added to our e-commerce capabilities with the
acquisition of E-Babylon in June 2005. We divested our e-commerce business in October 2008 as it was not core to our primary business of providing online
marketing services. Accordingly, the results of operations for this business have been classified as "discontinued operations" in our consolidated statements of operations. Please refer to
note 5 "Discontinued Operations" to our consolidated financial statements contained in this annual report on Form 10-K for further information about this divestiture.

AFFILIATE MARKETING SEGMENT

Our Affiliate Marketing segment services, outlined below, are offered through our wholly-owned subsidiary Commission Junction. Through
the combination of: a large-scale pay-for-performance model built on our proprietary technology platforms; marketing expertise; and a large, quality advertising network, our
Affiliate Marketing business enables advertisers to develop their own fully-commissioned

3

---



Table of Contents

online
sales force comprised of third-party affiliate publishers. We believe we are the largest provider of affiliate marketing services.

In
affiliate marketing, a publisher joins an advertiser's affiliate marketing program and agrees to distribute the advertiser's offers in exchange for commissions on leads or sales
generated. The publisher places the advertiser's display ads or text links on their website, in email campaigns, or in search listings, and receives a commission from the advertiser only when a
visitor takes an
agreed-upon action, such as filling out a form or making a purchase on the advertiser's website.

Our
Affiliate Marketing services are offered on a hosted basis to enable marketers to execute their own affiliate marketing programs without the expense of building and maintaining their
own in-house technical infrastructure and resources.



To facilitate our advertiser customers' recruitment of affiliate publishers, we manage CJ Marketplace, an advertising network dedicated
to our affiliate marketing business. Advertisers upload their offers onto CJ Marketplace, making them available for placement by affiliates. Affiliates apply to join the advertiser's program, and upon
acceptance, select and place the advertiser's offers on their websites, in email campaigns, or in search listings. These links are served and tracked by Commission Junction. When a visitor clicks on
one of the affiliate's links and then makes an online purchase or completes an agreed-upon action on the advertiser's website, that transaction is tracked and recorded by Commission
Junction.

CJ
Marketplace provides an open environment whereby affiliates can quickly view payment and conversion statistics to assess the effectiveness of every advertiser relationship and
advertisement, and advertisers can quickly gauge the quality and potential of every affiliate relationship in the marketplace, allowing them to maximize the performance and scale of their online
advertising campaigns.

Affiliate
Marketing revenues are principally driven by variable compensation that is based on either a percentage of commissions paid to affiliates or on a percentage of transaction
revenue generated from the programs managed with our affiliate marketing platforms.

In
addition to the transaction-related revenue streams, we also receive monthly service fees from our advertiser customers who elect to utilize our Program Management service offerings.
With these services, we assume full responsibility for all aspects of managing the advertiser's program including planning, affiliate recruitment, program review and management, and program
administration.



Search marketing allows advertisers to find prospective customers who are actively engaged in researching and buying products and
services online. Our CJ Search product provides a fully-managed, comprehensive search engine marketing (SEM) solution by combining proprietary technology and expert services to optimize keyword
campaigns across major search and shopping engines, and is specifically designed to complement our advertisers' affiliate marketing efforts. We use our technology and processes to create, manage and
optimize pay-per-click, paid inclusion and organic search campaigns for our advertiser customers. SEM revenues are driven primarily by a percentage of the revenue we generate
for our advertiser customers.

COMPARISON SHOPPING & SEARCH SEGMENT

Our online Comparison Shopping services enable consumers to research and compare products from among thousands of online and/or offline
merchants using our proprietary technologies. We gather product and merchant data and organize it into comprehensive catalogs on our destination websites, along with relevant consumer and professional
reviews. Our services are free for consumers,

4

---



Table of Contents

and
our customers primarily pay us on a CPC basis for traffic delivered to the customers' websites from listings on our websites.

Our
Comparison Shopping & Search segment services are offered through our wholly-owned subsidiaries Pricerunner, acquired in August 2004, Shopping.net, acquired in
December 2006, and MeziMedia, acquired in July 2007. Pricerunner operates comparison shopping destination websites in the United Kingdom, Sweden, the United States,
Germany, France, Denmark, and Austria. Shopping.net operates in the United Kingdom. MeziMedia operates its comparison shopping destination websites primarily in the United States under
the Smarter.com, Shopica.com and Couponmountain.com brand names.

In
addition to our Pricerunner and MeziMedia comparison shopping destination websites, Search123, which operates primarily in Europe, is ValueClick's self-service paid search
offering that generates its traffic primarily through syndication relationships with other search engines, Web portals and content websites. Search syndication revenues are driven primarily on a
CPC basis.

TECHNOLOGY SEGMENT

Our Technology segment provides advertisers, advertising agencies, website publishers, and other companies with the tools they need to
effectively manage their online marketing programs. Our technology products and services have been offered through our wholly-owned subsidiaries Mediaplex, Inc. and Mediaplex
Systems, Inc., both acquired in October 2001.



Our Mediaplex subsidiary is an application services provider ("ASP") offering technology infrastructure tools and services that enable
marketers to implement and manage their own online display advertising, SEM and email campaigns, and that assist online publishers with management of their website inventory. Our Mediaplex products
are based on our proprietary MOJO® technology platform, which has the ability, among other attributes, to automatically configure advertisements in response to real-time
information from an advertiser's enterprise data system and to provide ongoing campaign optimization and analytics. Mediaplex's products are priced primarily on a CPM or email-delivered basis.



Our Mediaplex Systems subsidiary was an ASP that used proprietary technology to deliver Web-based enterprise management
systems to advertising agencies, marketing communications companies, public relations agencies, and other large corporate advertisers. We divested the operations of this subsidiary in
October 2008 as it was not core to our primary business of providing online marketing services. Accordingly, the results of operations for this business have been classified as "discontinued
operations" in our consolidated statements of operations. Please refer to note 5 "Discontinued Operations" to our consolidated financial statements contained in this annual report on
Form 10-K for further information about this divestiture.

INTERNATIONAL OPERATIONS

We currently conduct international operations through wholly-owned subsidiaries throughout Europe as well as China and Japan.

In
August 1999, we commenced operations in the European market with ValueClick Europe Ltd., a wholly-owned subsidiary of ValueClick, Inc., based in the
United Kingdom. Since then we have expanded in Europe by opening wholly-owned subsidiaries in Paris, France; Munich, Germany; Madrid, Spain; and Dublin, Ireland. In August 2004, we
acquired Pricerunner AB, a leading provider of online

5

---



Table of Contents

comparison
shopping services in Europe, based in Sweden. In July 2007, we acquired MeziMedia, which has operations in the United States, China and Japan. Employees in our international
subsidiaries totaled 450 as of December 31, 2008. For additional information regarding our international operations, see note 17 "Segments and Geographic Information" to our
consolidated financial statements contained in this annual report on Form 10-K.

TECHNOLOGY PLATFORMS

Our proprietary applications are constructed from established, readily available technologies. Some of the basic components that our
products are built on come from leading software and hardware providers such as Oracle, Sybase, Sun, Dell, EMC, NetApp, and Cisco while some components are constructed from leading Open Source
software projects such as Apache Web Server, MySQL, Java, Perl, and Linux. By striking the proper balance between using commercially available software and Open Source software, our technology
expenditures are directed toward maintaining our technology platforms while minimizing third-party technology supplier costs.

We
build high-performance, availability and reliability into our product offerings. We safeguard against the potential for service interruptions at our third-party technology
vendors by engineering fail-safe controls into our critical components. ValueClick delivers its hosted solutions from co-location facilities located in nine cities,
geographically disbursed throughout the United States, Europe and China. ValueClick applications are monitored 24 hours a day, 365 days a year by specialized monitoring systems
that aggregate alarms to a human-staffed network operations center. If a problem occurs, appropriate engineers are notified and corrective action is taken.

SALES, MARKETING AND CUSTOMER SERVICE

We market our products and services primarily through direct marketing, print advertising and online advertising throughout the year.
We also market them through the ValueClick properties' websites, trade show participation and other media events. In addition, we actively pursue public relations programs to promote our brands,
products and services to potential network publishers and advertiser customers, as well as to industry analysts.

Customers

We sell our products and services to a variety of advertisers, advertising agencies and traffic distribution partners. Our Media and
Affiliate Marketing segment revenue is generated from thousands of customers and there are no significant customer concentrations in these segments. Our Comparison Shopping & Search and
Technology segment revenue is concentrated with a limited number of customers. A loss of, or reduction of revenue from, one or more of these significant customers could have a significant negative
impact on the revenue of these segments.

Competition

We face intense competition in the Internet advertising market. We expect that this competition will continue to intensify in the
future as a result of industry consolidation, the continuing maturation of the industry and low barriers to entry. We compete with a diverse and large pool of advertising, media and Internet
companies.

Our
ability to compete depends upon several factors, including the following:



6

---



Table of Contents



Additional
competitive factors include, but are not limited to, our: reputation, knowledge of the advertising market, financial controls, geographical coverage, relationships with
customers, technological capability, and quality and breadth of products and services. For additional information regarding our competitors, see "If we fail to compete effectively against other
Internet advertising companies, we could lose customers or advertising inventory and our revenue and results of operations could decline" in the Item 1A Risk Factors discussion in this annual
report on Form 10-K.

Seasonality and Cyclicality

We believe that our business is subject to seasonal fluctuations with the calendar fourth quarter generally being our strongest.
Expenditures by advertisers and advertising agencies vary in cycles and tend to reflect the overall economic conditions, as well as budgeting and buying patterns.

INTELLECTUAL PROPERTY RIGHTS

We currently rely on a combination of copyright, trademark and trade secret laws and restrictions on disclosure to protect our
intellectual property rights. Our success depends on the protection of the proprietary aspects of our technology as well as our ability to operate without infringing on the proprietary rights of
others. We also enter into proprietary information and confidentiality agreements with our employees, consultants and commercial partners and control access to, and distribution of, our software
documentation and other proprietary information. We have registered the trademark "ValueClick" in the United States and the European Union. We currently have nine pending U.S. patent
applications. In addition, we have been granted ten U.S. patents. We do not know if our current patent applications or any future patent application will result in a patent being issued within
the scope of the claims we seek, if at all, or whether any patents we may have or may receive will be challenged or invalidated. Although patents are only one component of the protection of
intellectual property rights, if our patent applications are denied, it may result in increased competition and the development of products substantially similar to our own. In addition, it is
difficult to monitor unauthorized use of technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States, and our
competitors may independently develop technology similar to our own. We will continue to assess appropriate occasions for seeking patent and other intellectual property protections for those aspects
of our technology that we believe constitute innovations providing significant competitive advantages.

CORPORATE HISTORY AND RECENT ACQUISITIONS

We commenced operations as ValueClick, LLC, a California limited liability company, on May 1, 1998. Prior to the
formation of ValueClick, LLC, the ValueClick Internet advertising business began in July 1997 as a line of business within Web-Ignite Corporation, a company wholly owned by
the founding member of ValueClick, LLC. The reorganization and formation of ValueClick, LLC was effected by the transfer of the Internet advertising business of Web-Ignite to
ValueClick, LLC. On December 31, 1998, ValueClick, LLC reorganized as ValueClick, Inc., a Delaware corporation. On March 30, 2000, we completed our initial public
offering of common stock. Our common stock is publicly traded and is reported on the NASDAQ Global Select
Market under the symbol "VCLK." We have acquired 14 companies since our inception, the most recent of which was MeziMedia in July 2007.

7

---



Table of Contents

MeziMedia
is a leading operator of U.S. comparison shopping websites. Under the terms of the agreement, we acquired all outstanding equity interests in MeziMedia for initial cash
consideration of $96.3 million, net of cash acquired of $18.9 million, plus approximately $700,000 in transaction costs, resulting in a total initial cash consideration of
$97.0 million. In addition to the initial cash consideration, the shareholders of MeziMedia earned $106.1 million and $62.6 million in cash consideration for achieving certain
revenue and earnings performance targets for the years ended December 31, 2007 and 2008, respectively. The shareholders of MeziMedia may also be entitled to additional contingent cash
consideration based on the achievement by MeziMedia of certain revenue and earnings performance targets for the year ending December 31, 2009. Total cash consideration will range between
approximately $265.7 million and $348.8 million, depending on whether the performance targets are met for the year ending December 31, 2009. MeziMedia provides the Company with
additional opportunities to monetize online traffic and expand its overall comparison shopping presence in the United States, China and Japan. The results of MeziMedia's operations are included
in the Company's consolidated financial statements beginning on the date of acquisition.

PRIVACY

We may collect personally identifiable information on a permitted basis. We store this data securely and do not use the data without
the explicit, knowing permission of the Web user when we collect the data on behalf of our customers. We rely on our customers to treat such data with the appropriate precaution and responsibility as
stated in their privacy policies. In addition, we use non-personally identifiable information provided by websites, pursuant to their consumer privacy policies, about their visitors'
general demographics and interests in order to target appropriate advertising to the websites.

Moreover,
if our customers have databases of their clients, we can use this data on behalf of those customers, again pursuant to their consumer privacy policies. The premise is that both
the website providing the ad space and the advertiser (1) have an opt-in relationship with the customer, (2) have an opportunity to share their consumer privacy policies with
their customers, and (3) provide an opportunity to opt-out.

Our
customers retain the right to use data they have obtained through explicit permission from a Web user; for example, if a client of our customer provides an email address to receive
information and updates. We rely on our customers' consumer privacy policies and practices, as well as the consumer privacy policies and practices of the publisher websites included in each
advertising campaign.

We
collect certain technical data (such as type of browser, operating system, domain type, date and time of viewer's response) when serving online advertisements. This type of
information is defined by the Network Advertising Initiative as non-personally identifiable information ("Ad Delivery and Reporting Data"). We may retain this Ad Delivery and
Reporting Data indefinitely.

We
use "cookies," among other techniques, to measure and report non-personally identifiable information to advertisers, such as the number of people who see their
advertisements or emails and the number of times people see the advertisement. A cookie is a small file that is stored in a Web user's hard drive. Cookies cannot read information from the Web user's
hard drive; rather they allow websites and advertisers to track advertising effectiveness and to ensure that viewers do not receive the same advertisements repeatedly. Cookies, by themselves, cannot
be used to identify any user if the user does not provide any personally identifiable information. They can be used, however, to allow personalization features such as stock portfolio tracking and
targeted news stories.

We
are compliant with the Platform for Privacy Protection Project, or P3P, compliance criteria. P3P is the most current privacy standard effort in our industry, providing simple and
automated privacy controls for Web users. Please refer to the section entitled "Government Enforcement Actions, Changes in Government Regulation and Industry Standards, Including, But Not Limited To,
Promotion-

8

---



Table of Contents

Based
Lead Generation Marketing, Spyware, Privacy and Email Matters, Could Decrease Demand For Our Products and Services and Increase Our Costs of Doing Business" in Item 1A "Risk Factors" of
this annual report on Form 10-K for further details about our compliance with privacy regulations.

EMPLOYEES

As of December 31, 2008, we had 739 employees in the U.S. and 450 employees in our international locations. None
of these employees are covered by collective bargaining agreements. Management believes that our relations with our employees are good.

EXECUTIVE OFFICERS

See Part III, Item 10 "Directors and Executive Officers of the Registrant" of this annual report on
Form 10-K for information about executive officers of the registrant.

WEBSITE ACCESS TO OUR PERIODIC SEC REPORTS

Our primary Internet address is www.valueclick.com. We make our Securities and Exchange Commission ("SEC") periodic reports
(Forms 10-Q and Forms 10-K) and current reports (Forms 8-K), and amendments to these reports, available free of charge through our
website as soon as reasonably practicable after they are filed electronically with the SEC. We may from time to time provide important disclosures to investors by posting them in the investor
relations section of our website, as allowed by SEC rules.

Materials
we file with the SEC may be read and copied at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, proxy
and information statements, and other information regarding our Company that we file electronically with the SEC.

CODE OF ETHICS AND BUSINESS CONDUCT

We have adopted a Code of Ethics and Business Conduct (the "Code") for our principal executive, financial and accounting, and
other officers, and our directors, employees, agents, and consultants. The Code is publicly available on our website at www.valueclick.com under the heading "About Us." Among other things, the Code
addresses such issues as conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of Company assets, compliance with applicable laws (including insider
trading laws), and reporting of illegal or unethical behavior.

Within
the Code, ValueClick has established an accounting ethics complaint procedure for all employees of the Company and its subsidiaries. The complaint procedure is for employees who
may have concerns regarding accounting, internal accounting controls and auditing matters. The Company
treats all complaints confidentially and with the utmost professionalism. If an employee desires, he or she may submit any concerns or complaints on an anonymous basis, and his or her concerns or
complaints will be addressed in the same manner as any other complaints. The Company does not, and will not, condone any retaliation of any kind against an employee who comes forward with an ethical
concern or complaint.

9

---





Table of Contents

ITEM 1A.    RISK FACTORS

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

This annual report on Form 10-K contains forward-looking statements based on the current expectations, assumptions, estimates, and projections
about us and our industry. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a
result of certain factors, as more fully described in this section and elsewhere in this annual report on Form 10-K. We undertake no obligation to release
publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

DETERIORATING MACROECONOMIC CONDITIONS IN THE UNITED STATES HAVE NEGATIVELY IMPACTED OUR BUSINESS AND FURTHER WEAKENING OF MACROECONOMIC CONDITIONS MAY HAVE ADDITIONAL
NEGATIVE IMPACTS ON OUR BUSINESS.

In 2008, we began experiencing weakness across most of our business segments in connection with deteriorating macroeconomic conditions
in the United States and Europe and many industry forecasts are predicting negative growth in certain channels of online advertising in 2009. We are not able to predict whether general
macroeconomic conditions, or conditions in the online advertising industry specifically, will worsen or improve, or the timing of such developments. If macroeconomic conditions worsen, we are not able
to predict the impact such worsening conditions will have on the online marketing industry in general, and our results of operations specifically. Further, when macroeconomic conditions do improve,
there can be no assurances that we will be able to regain the levels of revenue and profitability that we achieved prior to the macroeconomic downturn.

OUR PROFITABILITY MAY NOT REMAIN AT CURRENT LEVELS

We face risks that could prevent us from achieving our current profitability levels in future periods. These risks include, but are not
limited to, our ability to:



10

---



Table of Contents



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

IF ADVERTISING ON THE INTERNET LOSES ITS APPEAL, OUR REVENUE COULD DECLINE.

Our Media segment accounted for 48% of our revenue for the year ended December 31, 2008 in part by delivering advertisements
that generate leads, impressions, click-throughs, and other actions to our advertiser customers' websites. This business model may not continue to be effective in the future for a number of reasons,
including the following: click and conversion rates have always been low and may decline as the number of advertisements and ad formats on the Web increases; Web users can install "filter" software
programs which allow them to prevent advertisements from appearing on their computer screens or in their email boxes; Internet advertisements are, by their nature, limited in content relative to other
media; companies may be reluctant or slow to adopt online advertising that replaces, limits or competes with their existing direct marketing efforts; companies may prefer other forms of Internet
advertising we do not offer, including certain forms of search engine placements; companies may reject or discontinue the use of certain forms of online promotions that may conflict with their brand
objectives; companies may not utilize online advertising due to concerns of "click-fraud", particularly related to search engine placements; regulatory actions may negatively impact certain business
practices that we currently rely on to generate a portion of our revenue and profitability; and, perceived lead quality. If the number of companies who purchase online advertising from us does not
continue to grow, we may experience difficulty in attracting publishers, and our revenue could decline.

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

Our success depends in part on our ability to effectively manage our existing advertising space. The Web publishers and email list
owners that list their unsold advertising space with us are not bound by long-term contracts that ensure us a consistent supply of advertising space, which we refer to as inventory. In
addition, Web publishers or email list owners can change the amount of inventory they make available to us at any time. If a Web publisher or email list owner decides not to make advertising space
from its websites, newsletters or email lists available to us, we may not be able to replace this advertising space with advertising space from other Web publishers or email list owners that have
comparable traffic patterns and user demographics quickly enough to fulfill our advertisers' requests. This would result in lost revenue.

We
expect that our advertiser customers' requirements will become more sophisticated as the Web continues to mature as an advertising medium. If we fail to manage our existing
advertising space effectively to meet our advertiser customers' changing requirements, our revenue could decline. Our growth depends, in part, on our ability to expand our advertising inventory. To
attract new customers, we must maintain a consistent supply of attractive advertising space. Our success relies in part on expanding our advertising inventory by selectively adding new Web publishers
and email list owners to our networks that offer attractive demographics, innovative and quality content and growing Web user traffic and email volume. Our ability to attract new Web publishers and
email list owners to our networks and to retain Web publishers and email list owners currently in our networks will depend on various factors, some of which are beyond our control. These factors
include, but are not limited to: our ability to introduce new and innovative products and services, our ability to efficiently manage our existing advertising inventory, our pricing policies, and the
cost-efficiency to Web publishers and email

11

---



Table of Contents

list
owners of outsourcing their advertising sales. In addition, the number of competing intermediaries that purchase advertising inventory from Web publishers and email list owners continues to
increase. We cannot assure you that the size of our advertising inventory will increase or remain constant in the future.

OUR COMPARISON SHOPPING & SEARCH SEGMENT REVENUE IS SUBJECT TO CUSTOMER CONCENTRATION RISKS. THE LOSS OF ONE OR MORE OF THE MAJOR CUSTOMERS IN OUR COMPARISON
SHOPPING & SEARCH SEGMENT COULD SIGNIFICANTLY AND NEGATIVELY IMPACT THE REVENUE AND PROFITABILITY LEVELS OF THIS SEGMENT.

Our comparison shopping business generates revenue through a combination of: sponsored search listings placed on our destination
websites, merchant relationships, affiliate marketing networks and display advertising on our destination websites. A large portion of the revenue in our comparison shopping business is generated via
sponsored search listings from major search engines. Factors that could cause these relationships to cease or become significantly reduced in scale include, but are not limited to: the
non-renewal of our distribution agreement with one or more of the major search engines; the determination by one or more of the major search engines that consumer traffic received from us
does not meet their quality standards (in other words, the traffic is not converting at appropriate rates); and changes in the competitive environment, such as industry consolidation. If our
relationships with one or more of the major search engines were to cease or become significantly reduced in scale, our revenue and profitability levels could be significantly and negatively impacted.

CHANGES IN HOW WE GENERATE ONLINE CONSUMER TRAFFIC FOR OUR COMPARISON SHOPPING DESTINATION WEBSITES COULD NEGATIVELY IMPACT OUR ABILITY TO MAINTAIN OR GROW THE REVENUE AND
PROFITABILITY LEVELS OF OUR COMPARISON SHOPPING & SEARCH SEGMENT.

We generate online consumer traffic for our comparison shopping destination websites using various methods, including: organic traffic,
offline marketing campaigns, distribution agreements, search engine marketing (SEM) and search engine optimization (SEO). The current revenue and profitability levels of our Comparison
Shopping & Search segment are dependent upon our continued ability to use a combination of these methods to generate online consumer traffic to our websites in a cost-efficient
manner. Our SEM and SEO techniques have been developed to work with the existing search algorithms utilized by the major search engines. The major search engines frequently modify their search
algorithms. Future changes in these search algorithms could change the mix of the methods we use to generate online consumer traffic for our comparison shopping destination websites and could
negatively impact our ability to generate such traffic in a cost-efficient manner, which could result in a significant reduction to the revenue and profitability of our Comparison
Shopping & Search segment. There can be no assurances that we will be able to maintain the current mix of online consumer traffic sources for our comparison shopping destination websites or
that we will be able to modify our SEM and SEO techniques to address any future search algorithm changes made by the major search engines. In addition, in 2008, our Comparison Shopping business
received feedback from our advertiser partners, including the major search engines, that their conversion rate requirements were increasing in the face of a weakening consumer environment. To
accommodate the higher conversion rate requirements, we have been required to adjust how our comparison shopping destination websites generate online consumer traffic. These adjustments have resulted
in lower volumes of online consumer traffic to our comparison shopping destination websites and a corresponding decrease to the revenue and profitability we are able to generate in our Comparison
Shopping and Search segment. There can be no assurances that the conversion rate requirements of our advertiser partners will lessen in the future or that we will be able to regain the levels of
revenue and profitability we achieved in our Comparison Shopping business prior to this increase in conversion rate requirements.

12

---



Table of Contents

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

We may be subject to legal actions alleging intellectual property infringement (including patent infringement), unfair competition or
similar claims against us.
Companies may apply for or be awarded patents or have other intellectual property rights covering aspects of our technologies or businesses. One of the primary competitors of our Search123.com
subsidiary, Overture Services, Inc., purports to be the owner of U.S. Patent No. 6,269,361, which was issued on July 31, 2001 and is entitled "System and method for
influencing a position on a search result list generated by a computer network search engine." Overture has aggressively pursued its alleged patent rights by filing lawsuits against other
pay-per-click search engine companies such as MIVA and Google. MIVA and Google have asserted counter-claims against Overture including, but not limited to, invalidity,
unenforceability and non-infringement. BTG International, Inc. ("BTG") purports to own two patents related to affiliate marketing. The patents allegedly cover methods and
apparatuses for "Attaching Navigational History Information to Universal Resource Locator Links on a World Wide Web Page" (U.S. Patent No. 5,712,979) and for "Tracking the
Navigational Path of a User on the World Wide Web" (U.S. Patent No. 5,717,860). BTG has brought suit to enforce its patent rights against, among others, Barnesandnoble.com and
Amazon.com. While the Company is currently not subject to any material intellectual property litigation, any future litigation alleging intellectual property infringement by us could be costly, could
require us to change our business practices, could potentially hinder or prevent our ability to deliver our products and services, and could divert management's attention.

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

Websites typically place small files of non-personalized (or "anonymous") information, commonly known as cookies, on
an Internet user's hard drive. Cookies generally collect information about users on a non-personalized basis to enable websites to provide users with a more customized experience. Cookie
information is passed to the website through an Internet user's browser software. We currently use cookies to track an Internet user's movement through our advertiser customer's websites and to
monitor and prevent fraudulent activity on our networks. Most currently available Internet browsers allow Internet users to modify their browser settings to prevent cookies from being stored on their
hard drive, and some users currently do so. Internet users can also delete cookies from their hard drives at any time. Some Internet commentators and privacy advocates have suggested limiting or
eliminating the use of cookies, and legislation has been introduced in some jurisdictions to regulate the use of cookie technology. The effectiveness of our technology could be limited by any
reduction or limitation in the use of cookies. If the use or effectiveness of cookies were limited, we expect that we would need to switch to other technologies to gather demographic and behavioral
information. While such technologies currently exist, they are substantially less effective than cookies. We also expect that we would need to develop or acquire other technology to monitor and
prevent fraudulent activity on our networks. Replacement of cookies could require significant reengineering time and resources, might not be completed in time to avoid losing customers or advertising
inventory, and might not be commercially feasible. Our use of cookie technology or any other technologies designed to collect Internet usage information may subject us to litigation or investigations
in the future. Any litigation or government action against us could be costly and time consuming, could require us to change our business practices and could divert management's attention.

13

---



Table of Contents

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

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

The
market for Internet advertising and related products and services is highly competitive. We expect this competition to continue to increase, in part because there are no significant
barriers to entry to our industry. Increased competition may result in price reductions for advertising space, reduced margins and loss of market share. Our principal competitors include other
companies that provide advertisers with Internet advertising solutions and companies that offer pay-per-click search services. We compete in the performance-based marketing
segment with CPL and CPA performance-based companies, such as Platform-A (owned by AOL), Google Affiliate Network, Trade Doubler, and Linkshare (owned by Rakuten), and we compete with other large
Internet display advertising networks. In addition, we compete in the online comparison shopping market with focused comparison shopping websites such as Shopping.com (owned by eBay), Kelkoo, NexTag,
Shopzilla (owned by EW Scripps), and Pricegrabber (owned by Experian), and with search engines and portals such as Yahoo!, Google and MSN, and with online retailers such as Amazon.com and eBay. Large
websites with brand recognition, such as Yahoo!, Google, AOL and MSN, have direct sales personnel and substantial proprietary online advertising inventory that provide significant competitive
advantages compared to our networks, and they have a significant impact on pricing for online advertising overall. These companies have longer operating histories, greater name recognition and have
greater financial, technical, sales, and marketing resources than we have. Further, Google, Yahoo! and Microsoft have made acquisitions to put them in direct competition with a number of our
offerings.

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

14

---



Table of Contents

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

Our business and financial results will depend on continued growth in the use of the Internet. Internet usage may be inhibited for a
number of reasons, such as: inadequate network infrastructure; security concerns; inconsistent quality of service; governmental regulation; and, unavailability of cost-effective,
high-speed service.

If
Internet usage continues to grow, our infrastructure may not be able to support the demands placed on it, and our performance and reliability may decline. In addition, websites have
experienced interruptions in their service as a result of outages and other delays occurring throughout the Internet network infrastructure, and as a result of sabotage, such as electronic attacks
designed to interrupt service on many websites. The Internet could lose its viability as a commercial medium due to reasons including increased governmental regulation or delays in the development or
adoption of new technologies required to accommodate increased levels of Internet activity. If use of the Internet does not continue to grow, or if the Internet infrastructure does not effectively
support our growth, our revenue and results of operations could be materially and adversely affected.

WE DEPEND ON KEY PERSONNEL, THE LOSS OF WHOM COULD HARM OUR BUSINESS.

The success of the Company depends in part on the retention of personnel critical to our combined business operations due to, for
example, unique technical skills, management expertise or key business relationships. We may be unable to retain existing management, finance, engineering, sales, customer support, and operations
personnel that are critical to the success of the Company, which may result in disruption of operations, loss of key business relationships, information, expertise or know-how,
unanticipated additional recruitment and training costs, and diminished anticipated benefits of acquisitions, including loss of revenue and profitability.

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

DELAWARE LAW AND OUR STOCKHOLDER RIGHTS PLAN CONTAIN ANTI-TAKEOVER PROVISIONS THAT COULD DETER TAKEOVER ATTEMPTS THAT COULD BE BENEFICIAL TO OUR STOCKHOLDERS.

Provisions of Delaware law could make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our
stockholders. Section 203 of the Delaware General Corporation Law may make the acquisition of the Company and the removal of incumbent officers and directors more difficult by prohibiting
stockholders holding 15% or more of our outstanding voting stock from acquiring the Company, without our board of directors' consent, for at least three years from the date they first hold 15% or more
of the voting stock. In addition, our Stockholder Rights Plan has significant anti-takeover effects by causing substantial dilution to a person or group that attempts to acquire us on
terms not approved by our board of directors.

15

---



Table of Contents

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

Our success depends on the continuing and uninterrupted performance of our systems. Sustained or repeated system failures that
interrupt our ability to provide services to customers, including failures affecting our ability to deliver advertisements quickly and accurately and to process visitors' responses to advertisements,
would reduce significantly the attractiveness of our solutions to advertisers and Web publishers. Our business, results of operations and financial condition could also be materially and adversely
affected by any systems damage or failure that impacts data integrity or interrupts or delays our operations. Our computer systems are vulnerable to damage from a variety of sources, including
telecommunications failures, power outages, malicious or accidental human acts, and natural disasters. We lease data center space in El Segundo, San Jose and Sunnyvale, California; Mechanicsburg,
Pennsylvania; Ashburn, Virginia; Stockholm, Sweden; and several small-scale data centers or office locations throughout the United States and Europe. Therefore, any of the above factors
affecting any of these areas could substantially harm our business. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic break-ins,
computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Despite the precautions taken, unanticipated problems
affecting our systems could cause interruptions in the delivery of our solutions in the future and our ability to provide a record of past transactions. Our data centers and systems incorporate
varying degrees of redundancy. All data centers and systems may not automatically switch over to their redundant counterpart. Our insurance policies may not adequately compensate us for any losses
that may occur due to any failures in our systems.

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

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



16

---



Table of Contents



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

IF WE DO NOT SUCCESSFULLY EXECUTE OUR INTERNATIONAL STRATEGY, OUR REVENUE, RESULTS OF OPERATIONS AND THE GROWTH OF OUR BUSINESS COULD BE HARMED.

We initiated operations, through wholly-owned subsidiaries or divisions, in the United Kingdom in 1999, France and Germany in
2000, Sweden in 2004, Japan and China in 2007, and Spain and Ireland in 2008. Our international expansion and the integration of international operations present unique challenges and risks to our
company, and require management attention. Our foreign operations subject us to foreign currency exchange rate risks and we currently do not utilize hedging instruments to mitigate foreign currency
exchange rate risks.

Our
continued international expansion will subject us to additional foreign currency exchange rate risks and will require additional management attention and resources. We cannot assure
you that we will be successful in our international expansion and operations efforts. Our international operations and expansion subject us to other inherent risks, including, but not
limited to:



17

---



Table of Contents



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

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

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

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

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

GOVERNMENT ENFORCEMENT ACTIONS, CHANGES IN GOVERNMENT REGULATION AND INDUSTRY STANDARDS, INCLUDING, BUT NOT LIMITED TO, PROMOTION-BASED LEAD GENERATION MARKETING, SPYWARE,
PRIVACY AND EMAIL MATTERS, COULD DECREASE DEMAND FOR OUR PRODUCTS AND SERVICES AND INCREASE OUR COSTS OF DOING BUSINESS.

Laws and regulations that apply to Internet communications, commerce and advertising are becoming more prevalent. These regulations
could affect the costs of communicating on the Web and could adversely affect the demand for our advertising solutions or otherwise harm our business, results of operations and financial condition.
The United States Congress has enacted Internet legislation regarding children's privacy, copyrights, sending of commercial email (e.g., the Federal CAN-SPAM Act of 2003),
and taxation. The United States Congress has passed legislation regarding spyware (i.e., H.R. 964, the "Spy Act of 2007") and the New York Attorney General's office has sued a
major Internet

18

---



Table of Contents

marketer
for alleged violations of legal restrictions against false advertising and deceptive business practices related to spyware. The Federal Trade Commission ("FTC") conducted an investigation
into certain ValueClick websites which promise consumers a free gift of substantial value, and the manner in which the Company drives traffic to such websites, in particular through email. In the
first quarter of 2008, the Company agreed to a stipulated injunction with the FTC resolving this matter. The injunction makes clear that it constitutes no finding of any impermissible conduct by the
company in the past under preexisting FTC regulations then in effect. But the injunction also imposes new FTC guidelines for promotional lead generation activities, consistent with the approach that
the agency has recently begun to apply to the company's competitors. Compliance with these new FTC guidelines may adversely affect our ability to operate in the lead generation sector. In addition,
the FTC has recently issued its report on Self-Regulatory Principles for Online Behavioral Advertising which promotes principles designed to encourage meaningful self-regulation with regard to online
behavioral advertising within the industry. As evidenced by such report, the FTC maintains its support of self-regulation within the industry, however its message strongly encourages that industry
participants come up with more meaningful and rigorous self-regulation or invite legislation by states, Congress or a more regulatory approach by the FTC. Such legislation or increased regulatory
approach by the FTC may adversely affect our ability to grow the Company's media division and effectively grow its behavioral targeting platform. Other laws and regulations have been adopted and may
be adopted in the future, and may address issues such as user privacy, spyware, "do not email" lists, pricing, intellectual property ownership and infringement, copyright, trademark, trade secret,
export of encryption technology, click-fraud, acceptable content, search terms, lead generation, behavioral targeting, taxation, and quality of products and services. This legislation could hinder
growth in the use of the Web generally and adversely affect our business. Moreover, it could decrease the acceptance of the Web as a
communications, commercial and advertising medium. The Company does not use any form of spam or spyware and has policies to prohibit abusive Internet behavior, including prohibiting the use of spam
and spyware by our Web publisher partners.

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

WE COULD BE SUBJECT TO LEGAL CLAIMS, GOVERNMENT ENFORCEMENT ACTIONS AND DAMAGE TO OUR REPUTATION AND HELD LIABLE FOR OUR OR OUR CUSTOMERS' FAILURE TO COMPLY WITH FEDERAL,
STATE AND FOREIGN LAWS, REGULATIONS OR POLICIES GOVERNING CONSUMER PRIVACY, WHICH COULD MATERIALLY HARM OUR BUSINESS.

Recent growing public concern regarding privacy and the collection, distribution and use of information about Internet users has led to
increased federal, state and foreign scrutiny and legislative and regulatory activity concerning data collection and use practices. The United States Congress currently has pending legislation
regarding privacy and data security measures (e.g., S. 495, the "Personal Data Privacy and Security Act of 2007"). Any failure by us to comply with applicable federal, state and foreign laws
and the requirements of regulatory authorities may result in, among other things,

19

---



Table of Contents

indemnification
liability to our customers and the advertising agencies we work with, administrative enforcement actions and fines, class action lawsuits, cease and desist orders, and civil and
criminal liability. Recently, class action lawsuits have been filed alleging violations of privacy laws by ISPs. The European Union's directive addressing data privacy limits our ability to collect
and use information regarding Internet users. These restrictions may limit our ability to target advertising in most European countries. Our failure to comply with these or other federal, state or
foreign laws could result in liability and materially harm our business.

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

Third
parties may bring class action lawsuits against us relating to online privacy and data collection. We disclose our information collection and dissemination policies, and we may be
subject to claims if we act or are perceived to act inconsistently with these published policies. Any claims or inquiries could be costly and divert management's attention, and the outcome of such
claims could harm our reputation and our business.

Our
customers are also subject to various federal and state laws concerning the collection and use of information regarding individuals. These laws include the Children's Online Privacy
Protection Act, the Federal Drivers Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-Bliley Act, the Federal CAN-SPAM Act of 2003, as well as other laws that
govern the collection and use of consumer credit information. We cannot assure you that our customers are currently in compliance, or will remain in compliance, with these laws and their own privacy
policies. We may be held liable if our customers use our technologies in a manner that is not in compliance with these laws or their own stated privacy policies.

OUR STOCK PRICE IS LIKELY TO BE VOLATILE AND COULD DROP UNEXPECTEDLY.

Our common stock has been publicly traded since March 30, 2000. The market price of our common stock has been subject to
significant fluctuations since the date of our initial public offering.

The
stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of technology
companies. As a result, the market price of our common stock may materially decline, regardless of our operating performance. In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often been brought against that company. We are currently involved in this type of litigation, which arose shortly after our
stock price dropped significantly during the third quarter of 2007. Litigation of this type is often expensive and diverts management's attention and resources.

WE MAY BE REQUIRED TO RECORD A SIGNIFICANT CHARGE TO EARNINGS IF OUR GOODWILL OR AMORTIZABLE INTANGIBLE ASSETS BECOME IMPAIRED.

As disclosed in this Annual Report on Form 10-K, we recorded an impairment charge as of December 31, 2008
related to our goodwill and amortizable intangible assets totaling $322 million. As

20

---



Table of Contents

of
December 31, 2008, we have $172.6 million and $80.0 million of goodwill and amortizable intangible assets, respectively, remaining.

We
perform our annual impairment analysis of goodwill as of December 31 of each year, or sooner if we determine there are indicators of impairment, in accordance with Statement of
Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Our impairment analysis as of December 31, 2008 was finalized shortly
before filing this Annual Report on Form 10-K. Under SFAS 142, the impairment analysis of goodwill must be based on estimated fair values. The determination of fair values
requires assumptions and estimates of many critical factors, including, but not limited to: expected operating results; macroeconomic conditions; the Company's stock price; earnings multiples implied
in acquisitions in the online marketing industry; industry analyst expectations; and the discount rates used in the discounted cash flow analysis. We are required to perform our next goodwill
impairment analysis at December 31, 2009. If macroeconomic conditions deteriorate further in 2009 or our stock price experiences further declines, we may be required to record additional
impairment charges in the future.

We
are also required under accounting principles generally accepted in the United States of America to review our amortizable intangible assets for impairment whenever events and
circumstances indicate that the carrying value of such assets may not be recoverable. We may be required to record a significant charge to earnings in a period in which any impairment of our goodwill
or amortizable intangible assets is determined.

WE MAY INCUR LIABILITIES TO TAX AUTHORITIES IN EXCESS OF AMOUNTS THAT HAVE BEEN ACCRUED WHICH MAY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

As more fully described in note 9 "Income Taxes" to our consolidated financial statements contained in this annual report on
Form 10-K, we have recorded
significant income tax liabilities. The preparation of our consolidated financial statements requires estimates of the amount of income tax that will become payable in each of the jurisdictions in
which we operate. We may be challenged by the taxing authorities in these jurisdictions and, in the event that we are not able to successfully defend our position, we may incur significant additional
income tax liabilities and related interest and penalties which may have an adverse impact on our results of operations and financial condition.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD AND OUR BUSINESS MAY BE
HARMED AND OUR STOCK PRICE MAY BE ADVERSELY IMPACTED.

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. Any inability
to provide reliable financial reports or to prevent fraud could harm our business. The Sarbanes-Oxley Act of 2002 requires management to evaluate and assess the effectiveness of our internal control
over financial reporting. We determined that our internal control over financial reporting was effective as of December 31, 2008. In order to continue to comply with the requirements of the
Sarbanes-Oxley Act, we are required to continuously evaluate and, where appropriate, enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal
controls, we could be subject to litigation or regulatory scrutiny and investors could lose confidence in the accuracy and completeness of our financial reports. We cannot assure you that in the
future we will be able to fully comply with the requirements of the Sarbanes-Oxley Act or that management will conclude that our internal control over financial reporting is effective. If we fail to
fully comply with the requirements of the Sarbanes-Oxley Act, our business may be harmed and our stock price may decline.

21

---



Table of Contents

DECREASED EFFECTIVENESS OF EQUITY COMPENSATION COULD ADVERSELY AFFECT OUR ABILITY TO ATTRACT AND RETAIN EMPLOYEES AND HARM OUR BUSINESS.

We have historically used stock options as a key component of our employee compensation program in order to align employees' interests
with the interests of our stockholders, encourage employee retention, and provide competitive compensation packages. Volatility or lack of positive performance in our stock price may adversely affect
our ability to retain key employees, many of whom have been granted stock options, or to attract additional highly-qualified
personnel. As of December 31, 2008, a majority of our outstanding employee stock options have exercise prices in excess of the stock price on that date. To the extent this continues to occur,
our ability to retain employees may be adversely affected. Moreover, applicable NASDAQ listing standards relating to obtaining stockholder approval of equity compensation plans could make it more
difficult or expensive for us to grant stock options or other stock-based awards to employees in the future. As a result, we may incur increased compensation costs, change our equity compensation
strategy or find it difficult to attract, retain and motivate employees, any of which could materially, adversely affect our business.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

As of December 31, 2008, the Company leased facilities at the following locations (including square-feet and primary
function/segment(s) using the facility):



We
own land and a building, approximating 61,900 square-feet and 23,800 square-feet, respectively, in Simi Valley, California. We also lease small
office space and facilities in: Monrovia, California; Chicago, Illinois; Paris, France; Munich, Germany; Dublin, Ireland; Madrid, Spain; Stockholm, Sweden; Hong Kong, China and, Tokyo, Japan. In
addition, we use third-party co-location facilities that house our Web servers in: Sunnyvale, California; San Jose, California; Los Angeles, California; El Segundo, California; Irvine,
California; Santa Clara, California; Mechanicsburg, Pennsylvania; Stockholm, Sweden; and Shanghai, China. For additional information regarding our obligations under leases, see note 16
"Commitments and Contingencies" to our consolidated financial statements included in this annual report on Form 10-K.

ITEM 3.    LEGAL PROCEEDINGS

On November 20, 2007, the United States District Court for the Central District of California consolidated two purported
securities fraud class action lawsuits brought against the Company, its executive chairman and its former chief administrative officer. The court appointed the combined funds

22

---



Table of Contents

of
Laborers' International Union of North America National (Industrial) Pension and the LIUNA Staff & Affiliates Pension Fund (collectively, the "LIUNA Funds") as lead plaintiffs. In January,
the LIUNA Funds filed a consolidated complaint alleging violations of certain federal securities laws based upon the Company's and the Company's officers' alleged materially false and misleading
statements concerning the Company's compliance with laws and standards applicable to its lead generation business, among other things. The LIUNA Funds purport to represent all persons who purchased or
otherwise acquired the common stock of the Company between June 13, 2005 and July 27, 2007, and seek class certification, damages, costs incurred in bringing suit, and
equitable/injunctive relief. The Company filed a motion to dismiss this matter in March 2008 and on September 25, 2008, the Court granted defendants' motion to dismiss. After having
their first complaint dismissed by the Court, the LIUNA Funds filed their First Amended Consolidated Complaint on November 24, 2008. The Company has filed a motion to dismiss this complaint and
that motion is set to be heard by the Court on April 20, 2009. The Company anticipates defending this action vigorously.

On
October 31, 2007, plaintiff Susan Lacerenza, a ValueClick shareholder who previously had filed a derivative action in Los Angeles County Superior Court, dismissed that action
and re-filed her complaint in the United States District Court for the Central District of California. The operative complaint, brought against nominal defendant
ValueClick, Inc. and against individual ValueClick directors and executives (collectively with ValueClick, the "Defendants"), alleges violations of certain federal securities laws, breaches of
fiduciary duty, insider trading, and unjust enrichment. The allegations arose from the plaintiff's claim that ValueClick engaged in illegal and deceptive practices with respect to its lead generation
business and that the individual Defendants knowingly disseminated false and misleading financial results. Plaintiff seeks to recoup allegedly improper profits from the individual Defendants and also
seeks damages against the individual Defendants for harm allegedly caused to ValueClick. In January 2008, the Company filed a motion to dismiss this matter. Rather than oppose that motion, the
plaintiff filed a First Amended Complaint. In February 2008, upon stipulation of the parties, the Court stayed this action in light of the pending federal class action. The Company intends to
defend itself vigorously against these and related allegations.

The
ultimate resolution of these two matters, which is expected to occur within one year, could result in a loss that is greater than the amount accrued at December 31, 2008. The
Company has insurance coverage, which has been acknowledged by the carrier, that it believes is sufficient to cover the unaccrued exposure related to the above two matters. Accordingly, the Company
does not currently
believe the outcome of these matters will have a material impact on its future consolidated results of operations, financial position or cash flows.

On
April 8, 2008, Hypertouch, Inc. filed an action in the Superior Court of California, County of Los Angeles, against the Company. The complaint asserts causes of action
for violation of California Business & Professions Code §§ 17529.5 and 17200, et seq., arising from the plaintiff's alleged receipt of a large number of email
messages allegedly transmitted by the Company "and/or its agents" and seeks statutory damages for each such email. The Company filed its answer to the complaint on May 28, 2008. The Company is
defending this case vigorously and is currently engaged in active discovery. On February 18, 2009, the Company filed a motion for summary judgment seeking dismissal of each of the plaintiff's
claims on several independent grounds. The Company does not currently believe the outcome of this matter will have a material impact on its future consolidated results of operations, financial
position or cash flows.

From
time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. In addition, the Company may receive letters
alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any material legal proceedings, except as discussed above, nor is the Company aware of
any pending or threatened litigation that would have a material adverse effect on the Company's business, operating results, cash flows or financial condition should such litigation be resolved
unfavorably.

23

---



Table of Contents

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

No matters were submitted to a vote of security holders during the quarter ended December 31, 2008.

24

---





Table of Contents

PART II.

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has traded on the NASDAQ Global Select Market (including its predecessor markets) under the symbol "VCLK" since our
initial public offering on March 30, 2000. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ
Global Select Market. On February 20, 2009, the last sale price of our common stock reported by the NASDAQ Global Select Market was $6.18 per share.

Price Range of
Common StockHigh

LowFiscal Year Ended December 31, 2008Fourth Quarter

$
10.18

$
4.66Third Quarter

$
15.47

$
9.44Second Quarter

$
21.00

$
14.90First Quarter

$
23.75

$
16.11




Price Range of
Common StockHigh

LowFiscal Year Ended December 31, 2007Fourth Quarter

$
29.97

$
20.22Third Quarter

$
31.49

$
18.06Second Quarter

$
36.70

$
26.06First Quarter

$
29.33

$
22.61


Stockholders

As of December 31, 2008, there were 582 stockholders of record who held shares of our common stock.

Dividend Policy

We have not declared or paid any cash dividends on our capital stock since our inception and we do not anticipate paying cash dividends
in the foreseeable future.

25

---



Table of Contents

Stockholder Return Performance Graph

Set forth below is a graph comparing the cumulative total stockholder return of $100 invested in our common stock on
December 31, 2003 through December 31, 2008 relative to the cumulative total return of $100 invested in the NASDAQ Composite Index and the RDG Internet Composite Index calculated
similarly for the same period.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among ValueClick, Inc., The NASDAQ Composite Index
And The RDG Internet Composite Index

GRAPHIC

---

26

---



Table of Contents

Issuer Purchases of Equity Securities

The table below summarizes the Company's repurchases of common stock during the three months ended December 31, 2008 (dollar
amounts, except per share data, are in millions).

Period

Total Number of Shares Purchased(1)

Average Price Paid per Share(2)

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or ProgramsOctober 1, 2008 through October 31, 2008




$





$
106.1November 1, 2008 through November 30, 2008










$
106.1December 1, 2008 through December 31, 2008


189,840


5.66


189,840

$
105.0Total


189,840

$
5.66


189,840

$
105.0


---

27

---



Table of Contents

ITEM 6.    SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to our consolidated statements of operations for the years ended
December 31, 2008, 2007 and 2006 and with respect to our consolidated balance sheets as of December 31, 2008 and 2007 have been derived from the audited consolidated financial statements
of ValueClick which are included elsewhere herein. The consolidated statement of operations data for the years ended December 31, 2005 and 2004 and the consolidated balance sheet data as of
December 31, 2006, 2005 and 2004 have been derived from our audited consolidated financial statements not included herein. The selected consolidated financial data set forth below is qualified
in its entirety by, and should be read in conjunction with both Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this annual report on
Form 10-K, and the consolidated financial statements and the notes to those consolidated financial statements included in Item 8 "Financial Statements and Supplementary Data"
of this annual report on Form 10-K.

28

---



Table of Contents

CONSOLIDATED STATEMENT OF OPERATIONS DATA

For the Year Ended December 31,2008

2007

2006

2005

2004(in thousands, except per share data)Consolidated Statement of Operations Data(1):Revenue

$
625,806

$
616,508

$
509,108

$
269,686

$
149,820Cost of revenue


204,052


188,686


144,963


73,924


43,139Gross profit


421,754


427,822


364,145


195,762


106,681Operating expenses:Sales and marketing(2)


181,128


183,313


156,425


66,571


33,377General and administrative(2)


98,098


75,555


55,411


37,630


25,072Technology(2)


39,278


34,439


31,354


20,422


14,105Amortization of intangible assets


28,882


24,745


19,490


10,831


4,111Impairment of goodwill and intangible assets


322,000











Restructuring benefit, net











(73
)

(1,003
)Total operating expenses


669,386


318,052


262,680


135,381


75,662Income (loss) from operations


(247,632
)

109,770


101,465


60,381


31,019Interest income and other, net


2,173


12,026


7,982


5,076


3,728Gain on sale of equity interest in Japan subsidiary














8,007Income (loss) before income taxes and minority interest


(245,459
)

121,796


109,447


65,457


42,754Income tax expense (benefit)


(26,971
)

51,448


47,276


27,330


14,318Income (loss) before minority interest


(218,488
)

70,348


62,171


38,127


28,436Minority share of loss in consolidated subsidiary














130Income (loss) from continuing operations


(218,488
)

70,348


62,171


38,127


28,566Discontinued operations:Income (loss) from discontinued operations, net of tax


(608
)

264


403


2,517


2,656Gain on disposition, net of tax


4,984











Net income from discontinued operations


4,376


264


403


2,517


2,656Net income (loss)

$
(214,112
)
$
70,612

$
62,574

$
40,644

$
31,222Basic net income (loss) per common shareContinuing operations

$
(2.37
)
$
0.71

$
0.62

$
0.43

$
0.36Discontinued operations


0.05





0.01


0.03


0.03$
(2.32
)
$
0.71

$
0.63

$
0.46

$
0.39Diluted net income (loss) per common shareContinuing operations

$
(2.37
)
$
0.70

$
0.61

$
0.42

$
0.34Discontinued operations


0.05





0.01


0.03


0.03$
(2.32
)
$
0.70

$
0.62

$
0.45

$
0.37Weighted-average shares used to calculate basic net income (loss) per common share


92,325


99,224


99,600


87,722


80,063Weighted-average shares used to calculate diluted net income (loss) per common share


92,325


100,518


101,721


90,857


84,038


---

29

---



Table of Contents

Acquisitions

DateMeziMedia

July 2007Shopping.net

December 2006Fastclick, Inc.

September 2005Web Marketing Holdings, Inc. ("Webclients")

June 2005E-Babylon, Inc.

June 2005Pricerunner AB

August 2004




Dispositions

DateMediaplex Systems

October 2008E-Babylon, Inc

October 2008ValueClick Japan

March 2004


For the Year Ended December 31,2008

2007

2006

2005

2004Sales and marketing

$
16,196

$
4,964

$
4,394

$
817

$
369General and administrative


31,154


10,930


5,247


382


245Technology


5,133


2,397


2,226


823


125$
52,483

$
18,291

$
11,867

$
2,022

$
739


Consolidated Balance Sheet Data:

As of December 31,2008

2007

2006

2005

2004(in thousands)Cash, cash equivalents and marketable securities

$
150,412

$
287,517

$
281,594

$
240,783

$
242,583Working capital

$
77,183

$
179,649

$
315,576

$
259,797

$
241,424Total assets

$
603,279

$
1,011,022

$
793,266

$
720,861

$
384,714Total non-current liabilities

$
73,195

$
81,890

$
62,143

$
35,372

$
14,964Total stockholders' equity

$
353,479

$
709,933

$
643,709

$
618,543

$
328,761


30

---



Table of Contents

Quarterly Results

The following table sets forth certain selected financial information for our eight most recent fiscal quarters. In the opinion of our
management, this unaudited financial information has been prepared on the same basis as the audited financial statements, and includes all adjustments, consisting only of normal recurring adjustments,
necessary to fairly state this information when read in conjunction with our consolidated financial statements and the related notes contained elsewhere herein. These operating results are not
necessarily indicative of results of any future period.

For the Three-Month Period EndedDec. 31,
2008

Sept. 30,
2008

Jun. 30,
2008

Mar. 31,
2008

Dec. 31,
2007

Sept. 30,
2007

Jun. 30,
2007

Mar. 31,
2007(in thousands, except per share data)Revenue

$
150,091

$
148,065

$
158,524

$
169,126

$
175,721

$
150,752

$
141,573

$
148,462Cost of revenue


52,377


51,381


49,042


51,252


53,759


47,129


45,356


42,442Gross profit


97,714


96,684


109,482


117,874


121,962


103,623


96,217


106,020Operating expenses:Sales and marketing(1)


37,051


49,434


44,673


49,970


51,805


44,724


40,296


46,488General and administrative(1)


19,057


38,637


19,524


20,880


24,402


17,638


16,607


16,908Technology(1)


8,421


11,777


9,638


9,442


9,142


8,387


8,363


8,547Amortization of intangible assets


6,498


7,047


7,680


7,657


7,879


6,623


5,050


5,193Impairment of goodwill and intangible assets


322,000




















Total operating expenses


393,027


106,895


81,515


87,949


93,228


77,372


70,316


77,136Income (loss) from operations


(295,313
)

(10,211
)

27,967


29,925


28,734


26,251


25,901


28,884Interest income and other, net


(1,913
)

(371
)

1,410


3,047


2,789


2,938


3,371


2,928Income (loss) before income taxes


(297,226
)

(10,582
)

29,377


32,972


31,523


29,189


29,272


31,812Income tax expense (benefit)


(40,557
)

(13,002
)

12,829


13,759


13,964


12,406


11,715


13,363Income (loss) from continuing operations


(256,669
)

2,420


16,548


19,213


17,559


16,783


17,557


18,449Discontinued operations:Income (loss) from discontinued operations, net of tax(1)


(82
)

(421
)

(59
)

(46
)

(40
)

48


71


185Gain on disposition, net of tax


4,984




















Income (loss) from discontinued operations, net of tax


4,902


(421
)

(59
)

(46
)

(40
)

48


71


185Net income (loss)

$
(251,767
)
$
1,999

$
16,489

$
19,167

$
17,519

$
16,831

$
17,628

$
18,634Basic net income (loss) per common shareContinuing operations

$
(2.96
)
$
0.03

$
0.17

$
0.20

$
0.18

$
0.17

$
0.18

$
0.19Discontinued operations


0.06


(0.01
)
















$
(2.90
)
$
0.02

$
0.17

$
0.20

$
0.18

$
0.17

$
0.18

$
0.19Diluted net income (loss) per common shareContinuing operations

$
(2.96
)
$
0.03

$
0.17

$
0.19

$
0.18

$
0.17

$
0.17

$
0.18Discontinued operations


0.06


(0.01
)
















$
(2.90
)
$
0.02

$
0.17

$
0.19

$
0.18

$
0.17

$
0.17

$
0.18


---

For the Three-Month Period EndedDec. 31,
2008

Sept. 30,
2008

Jun. 30,
2008

Mar. 31,
2008

Dec. 31,
2007

Sept. 30,
2007

Jun. 30,
2007

Mar. 31,
2007Sales and marketing

$
612

$
12,322

$
1,648

$
1,614

$
1,516

$
1,160

$
1,278

$
1,010General and administrative


1,561


23,191


2,947


3,455


3,080


2,789


2,979


2,082Technology


424


3,421


651


637


663


589


629


516$
2,597

$
38,934

$
5,246

$
5,706

$
5,259

$
4,538

$
4,886

$
3,608


31

---



Table of Contents

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and the related notes thereto included elsewhere in this annual report on Form 10-K beginning on page F-1.

The
following discussion contains forward-looking statements based on the current expectations, assumptions, estimates, and projections about us and our industry. These forward-looking
statements involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements as a result of certain factors, as more fully described
in Item 1A "Risk Factors" and elsewhere in this annual report on Form 10-K. We undertake no obligation to release publicly any revisions to any forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We offer a suite of products and services that enable marketers to advertise and sell their products through all major online marketing
channelsdisplay advertising, lead generation marketing, email marketing, search marketing, comparison shopping, and affiliate marketing. We also offer technology infrastructure tools and
services that enable marketers to implement and manage their own online display advertising and email campaigns, and that assist online publishers with management of their website inventory. The broad
range of products and services that we provide enables our customers to address all aspects of their online marketing process, from strategic planning through execution, including results measurement
and campaign refinements. In October 2008, we completed the dispositions of our Mediaplex Systems subsidiary and our e-commerce operations. The results of operations of these
disposed business have been classified as discontinued operations in our consolidated financial statements. All current year and prior year financial information discussed herein pertains to the
remaining continuing operations.

On
July 30, 2007, we completed the acquisition of MeziMedia and on December 1, 2006, we completed the acquisition of Shopping.net. We have included the results of
operations of MeziMedia and Shopping.net in our consolidated results of operations beginning on the date of acquisition. Note 4 "Recent Business Combinations" to our consolidated financial
statements included in this annual report on Form 10-K provides unaudited pro forma revenue, net income and basic and diluted net income per common share for the year ended
December 31, 2007 as if the acquisition of MeziMedia occurred as of January 1, 2007.

We
derive our revenue from four business segments. These business segments are presented on a worldwide basis and include: Media, Affiliate Marketing, Comparison Shopping &
Search, and Technology. In the second quarter of 2008, we changed our internal reporting structure, which resulted in changes in our reportable segments to include our Search 123 product (which
was previously included in the Affiliate Marketing segment) with the Comparison Shopping segment (renamed "Comparison Shopping & Search") in order to present search traffic-based businesses in
one segment. In accordance with Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"), all prior period
segment information has been revised to conform to the new segment presentation. Each of these four business segments is described in Item 1 "Business" of this annual report on
Form 10-K.

Our
operations and financial performance depend on general economic conditions. The U.S. economy has experienced, and could continue to experience, an economic downturn due to
various factors including: the crisis in credit markets, slower economic activity, decreased consumer confidence, high consumer debt levels and unemployment rates, and other adverse business
conditions. Such fluctuations in the U.S. economy could cause, among others, deterioration and continued decline

32

---



Table of Contents

in
business and consumer spending, reductions in our customer's advertising budgets, and a decrease in demand for the types of online marketing services we provide or the products our customers offer.
These factors have negatively impacted our revenue levels and could continue to negatively impact our business in the future.

The
following table provides revenue, gross profit, operating expenses, and income from operations information for each of our four business segments. Segment income from operations, as
shown below, excludes the effects of: stock-based compensation; amortization of intangible assets; impairment of goodwill and intangible assets, and corporate expenses, as these items are excluded
from the segment performance measures utilized by the Company's chief operating decision maker in evaluating the performance of the segments. Corporate expenses consist of those costs not directly
attributable to a business segment, and include: salaries and benefits for the Company's executive, finance, legal, corporate governance, human resources, and facilities organizations; fees for
professional service providers including audit, legal, tax, and Sarbanes-Oxley compliance; insurance; and other corporate expenses. A reconciliation of segment income from operations to consolidated
income from operations and a reconciliation of segment revenue to consolidated revenue are also provided in the following table.

For the Year Ended December 31,2008

2007

2006(in thousands)Media SegmentRevenue

$
301,256

$
366,312

$
353,281Cost of revenue


136,220


140,625


120,280Gross profit


165,036


225,687


233,001Operating expenses


91,854


138,838


140,845Segment income from operations

$
73,182

$
86,849

$
92,156Affiliate Marketing SegmentRevenue

$
121,972

$
115,977

$
98,569Cost of revenue


19,374


12,978


10,646Gross profit


102,598


102,999


87,923Operating expenses


43,143


39,798


32,243Segment income from operations

$
59,455

$
63,201

$
55,680Comparison Shopping & Search SegmentRevenue

$
177,145

$
112,706

$
39,765Cost of revenue


46,950


33,695


11,256Gross profit


130,195


79,011


28,509Operating expenses


89,263


56,504


23,207Segment income from operations

$
40,932

$
22,507

$
5,302Technology SegmentRevenue

$
28,670

$
23,741

$
18,778Cost of revenue


4,147


3,880


3,555Gross profit


24,523


19,861


15,223Operating expenses


10,923


9,324


8,607Segment income from operations

$
13,600

$
10,537

$
6,616


33

---



Table of Contents

For the Year Ended December 31,2008

2007

2006(in thousands)Reconciliation of segment income from operations to consolidated income from operations:Total segment income from operations

$
187,169

$
183,094

$
159,754Corporate expenses


(31,436
)

(30,288
)

(26,932
)Stock-based compensation


(52,483
)

(18,291
)

(11,867
)Amortization of intangible assets


(28,882
)

(24,745
)

(19,490
)Impairment of goodwill and intangible assets


(322,000
)




Consolidated income (loss) from operations

$
(247,632
)
$
109,770

$
101,465Reconciliation of segment revenue to consolidated revenue:Media

$
301,256

$
366,312

$
353,281Affiliate Marketing


121,972


115,977


98,569Comparison Shopping & Search


177,145


112,706


39,765Technology


28,670


23,741


18,778Inter-segment eliminations


(3,237
)

(2,228
)

(1,285
)Consolidated revenue

$
625,806

$
616,508

$
509,108


RESULTS OF OPERATIONSFiscal Years Ended December 31, 2008 and 2007

Revenue.Consolidated revenue for the year ended December 31, 2008 was $625.8 million, representing a 1.5% increase
over the prior year
total of $616.5 million.

Media
segment revenue decreased to $301.3 million for the year ended December 31, 2008 compared to $366.3 million for 2007 due to a decrease in our lead generation
marketing revenue, offset by a small increase in our display advertising revenue. We believe the decrease in our lead generation marketing revenue was primarily due to the FTC inquiry into this
business that is described further in note 16 "Commitments and Contingencies" to our consolidated financial statements, as well as general macroeconomic weakness during 2008.

Affiliate
Marketing segment revenue increased to $122.0 million for the year ended December 31, 2008 compared to $116.0 million in 2007. This increase of
$6.0 million, or 5.2%, was due to an increase, both in the U.S. and Europe, in the number of customers and an increase in transaction volumes associated with both our new and existing
customers, offset by the loss of a major customer in the first half of 2008.

Comparison
Shopping & Search segment revenue increased to $177.1 million for the year ended December 31, 2008 compared to $112.7 million in 2007. The increase
of $64.4 million, or 57.2%, was primarily attributable to the acquisition of MeziMedia in July 2007 as well as growth in our existing European comparison shopping operations. With the
acquisition of MeziMedia, Comparison Shopping & Search segment revenue is concentrated with a limited number of customers. A loss of, or reduction of revenue from, one or more of these
customers could have a significant negative impact on the revenue of this segment.

Technology
segment revenue was $28.7 million for the year ended December 31, 2008 compared to $23.7 million in 2007, an increase of $4.9 million, or 20.8%.
The increase in revenue was primarily related to higher volumes of ad serving, both domestically and in Europe, during the year ended December 31, 2008 compared to the same period of the prior
year. Technology segment revenue is highly concentrated with a few significant customers. A loss of, or reduction of revenue from, one or more of these customers could have a significant negative
impact on the revenue of this segment.

34

---



Table of Contents

Cost of Revenue and Gross Profit.Cost of revenue for the Media and Comparison Shopping & Search segments consists
primarily of amounts that
we pay to website publishers that are directly related to a revenue-generating event. We pay these publishers on a CPC, CPA, CPL, or CPM basis. Cost of revenue for all segments also includes labor
costs, depreciation on revenue-producing technologies and Internet access costs. Consolidated cost of revenue was $204.1 million for the year ended December 31, 2008 compared to
$188.7 million in 2007, an increase of $15.4 million, or 8.1%. The consolidated gross margin decreased from 69.4% for the year ended December 31, 2007 to 67.4% for the year ended
December 31, 2008. This decrease in consolidated gross margin is primarily a result of the lower gross margins experienced by our Media and Affiliate Marketing segments in 2008 as described
below.

Cost
of revenue for the Media segment decreased $4.4 million, or 3.1%, to $136.2 million for the year ended December 31, 2008 compared to $140.6 million in
2007. Our Media segment gross margin decreased to 54.8% for the year ended December 31, 2008 compared to 61.6% for the same period in 2007. The decrease in Media segment gross margin resulted
primarily from a lower mix of promotion-based lead generation revenue, which generates a higher gross margin than other components of Media segment revenue due largely to the classification of certain
online advertising costs as sales and marketing expense and not as cost of revenue. These online advertising costs are classified as sales and marketing expense as they are not directly related to a
revenue-generating event.

Cost
of revenue for the Affiliate Marketing segment was $19.4 million for the year ended December 31, 2008 compared to $13.0 million in 2007. Our Affiliate Marketing
segment gross margin decreased to 84.1% for the year ended December 31, 2008 from 88.8% for the same period in 2007 due to the mix of lower margin services revenue in the current year as
compared to the prior year.

Cost
of revenue for the Comparison Shopping & Search segment was $47.0 million for the year ended December 31, 2008 compared to $33.7 million in 2007. The
increase in cost of revenue was primarily due to the acquisition of MeziMedia, acquired in July 2007. Our Comparison Shopping segment gross margin increased to 73.5% for 2008 from 70.1% in 2007
due primarily to the full year impact in 2008 of the acquisition of MeziMedia.

Technology
segment cost of revenue was $4.1 million for the year ended December 31, 2008 compared to $3.9 million in 2007. Our Technology segment gross margin
increased to 85.5% in 2008 from 83.7% in 2007 due to the operating leverage associated with higher revenue. As the gross margin for the Technology segment is highly dependent upon revenue due to the
existing operating leverage, any increases or decreases in segment revenue may have a significant impact on segment gross margin.



Sales and Marketing.Sales and marketing expenses consist primarily of compensation and employee benefits of sales and marketing,
network development
and related support teams, certain online and offline advertising costs, travel, trade shows, and marketing materials. Online advertising costs included in sales and marketing expenses are comprised
of: amounts that we pay to website publishers that are not directly associated with a revenue-generating event; and amounts that we pay to search engines for driving consumer traffic to our owned and
operated websites. Sales and marketing expenses for the year ended December 31, 2008 were $181.1 million compared to $183.3 million in 2007, a decrease of $2.2 million, or
1.2%. Sales and marketing expenses decreased primarily due to lower online advertising costs in our lead generation marketing business, offset by higher stock-based compensation and the inclusion of a
full year of online advertising costs for MeziMedia, acquired in July 2007. Please refer to the Stock-Based Compensation section below for a discussion of the higher stock-based compensation
expense in 2008. Our sales and marketing expenses as a percentage of revenue decreased to 28.9% for the year ended December 31, 2008 compared to 29.7% in 2007 due to the lower lead generation
marketing activities.

35

---



Table of Contents

General and Administrative.General and administrative expenses consist primarily of facilities costs, executive and administrative
compensation and
employee benefits, depreciation, professional services fees, insurance costs, and other general overhead costs. General and administrative expenses increased to $98.1 million for the year ended
December 31, 2008 compared to $75.6 million in 2007, an increase of $22.5 million, or 29.8%. General and administrative expenses increased primarily due to an increase of
$20.2 million in stock-based compensation. Please refer to the Stock-Based Compensation section below for a discussion of the higher stock-based compensation expense in 2008. As a result, our
general and administrative expenses as a percentage of revenue increased to 15.7% for the year ended December 31, 2008 compared to 12.3% in 2007.

Technology.Technology expenses include costs associated with the maintenance of our technology platforms, including compensation and
employee
benefits for our engineering and network operations departments, as well as costs for contracted services and supplies. Technology expenses for the year ended December 31, 2008 were
$39.3 million compared to $34.4 million in 2007, an increase of $4.8 million, or 14.1%. The increase in technology expenses was due primarily to an increase of $2.7 million
in stock-based compensation and the inclusion of a full year of MeziMedia's technology expenses. Please refer to the Stock-Based Compensation section below for a discussion of the higher stock-based
compensation expense in 2008. Our technology expenses as a percentage of revenue increased to 6.3% for the year ended December 31, 2008 compared to 5.6% in 2007 primarily due to the higher
stock-based compensation.

Segment Income from Operations.Media segment income from operations for the year ended December 31, 2008 decreased 15.7%,
or
$13.7 million, to $73.2 million, from $86.8 million in the prior year, and represented 24.3% and 23.7% of Media segment revenue in these respective periods. Media segment
operating margin increased due to cost reduction efforts initiated in response to the lower lead generation marketing revenue described above.

Affiliate
Marketing segment income from operations for the year ended December 31, 2008 decreased 5.9%, or $3.7 million, to $59.5 million, from $63.2 million
in the prior year, and represented 48.7% and 54.5% of Affiliate Marketing segment revenue in these respective periods. The lower operating margin was due primarily to the lower gross margin as
described above and higher operating costs associated with our international expansion.

Comparison
Shopping & Search segment income from operations for the year ended December 31, 2008 increased to $40.9 million, from $22.5 million in the prior
year, and represented 23.1% and 20.0% of Comparison Shopping segment revenue in these respective periods. The increase in Comparison Shopping & Search segment income from operations and
operating margin was largely attributable to the full year impact of MeziMedia, which was acquired in July 2007.

Technology
segment income from operations for the year ended December 31, 2008 increased to $13.6 million, from $10.5 million in the prior year, and represented
47.4% and 44.4% of Technology segment revenue in these respective periods. The increase in Technology segment income from operations and the higher operating margin was attributable to the operating
leverage associated with the higher revenue as described above.

Stock-Based Compensation.Stock-based compensation for the year ended December 31, 2008 amounted to $52.5 million
compared to
$18.3 million in 2007. The increase of $34.2 million was primarily due to the impact of a one-time stock-based compensation charge of $33.8 million, which represents
the acceleration of expense associated with unvested stock options repurchased by the Company through a tender offer process completed during 2008.

We
currently anticipate total stock-based compensation of approximately $10 million for the year ending December 31, 2009. Such amounts may change as a result of higher or
lower than anticipated equity award grants to new and existing employees, differences between actual and estimated

36

---



Table of Contents

forfeitures
of stock options and restricted stock, fluctuations in the market value of our common stock, modifications to our existing stock option programs, additions of new stock-based compensation
programs, or other factors.

Amortization of Intangible Assets.Amortization of intangible assets for the year ended December 31, 2008 was
$28.9 million compared to
$24.7 million in 2007. This expense represents the amortization of intangible assets acquired through business combinations. The increase compared to the prior year was due to the intangible
assets purchased in the MeziMedia acquisition in July 2007. We currently anticipate total amortization of intangible assets of approximately $25 million for the year ending
December 31, 2009.

Impairment of Goodwill and Intangible Assets.During 2008 we recorded an impairment charge on our goodwill and intangible assets
of
$322.0 million related to our Media and Comparison Shopping & Search reporting units. We believe this impairment charge is primarily a result of the significant decline in our stock
price during 2008 and the weak macroeconomic environment. Refer to Critical Accounting Policies below for further details about this impairment charge.

Interest Income and Other, net.Interest income and other, net, consists principally of interest earned on our cash and cash
equivalents and
marketable securities and foreign currency exchange gains or losses. Interest income and other, net was $2.2 million for 2008 compared to $12.0 million for the same period in 2007. The
decrease of $9.9 million was primarily attributable to a reduction in interest income due to lower average cash and cash equivalents and marketable securities balances in 2008, as well as the
achievement of lower investment yields as compared to the prior year. In addition, the significant strengthening of the U.S. dollar in the second half of 2008 resulted in a foreign currency
exchange loss in the amount of $3.6 million due primarily to the requirement to mark-to-market certain intercompany loan balances with certain of our European
subsidiaries.

Income Tax Expense.For the year ended December 31, 2008, we recorded an income tax benefit of $27.0 million compared
to income tax
expense of $51.4 million in 2007. The decrease in the effective income tax rate for the year ended December 31, 2008 to (11.0)% from 42.2% for the year ended December 31, 2007 was
primarily a result of a $245.5 million loss from continuing operations before income taxes associated with the goodwill impairment and the recognition of $10.0 million in tax benefits
related to the reversal of contingency reserves due to the expiration of certain statutes of limitations. We currently expect our effective tax rate to be approximately 42% in the year ending
December 31, 2009.

RESULTS OF OPERATIONSFiscal Years Ended December 31, 2007 and 2006

Revenue.Consolidated revenue for the year ended December 31, 2007 was $616.5 million, representing a 21.1% increase
over 2006 revenue
of $509.1 million.

Media
segment revenue increased 3.7% to $366.3 million for the year ended December 31, 2007 compared to $353.3 million for 2006. In 2007, strong growth in our
display advertising revenue was largely offset by a decrease in our lead generation marketing revenue. We believe the decrease in our lead generation marketing revenue was primarily due to the FTC
inquiry into this business that is described further in note 16 "Commitments and Contingencies" to our consolidated financial statements.

Affiliate
Marketing segment revenue increased to $116.0 million for the year ended December 31, 2007 compared to $98.6 million in 2006. This increase of
$17.4 million, or 17.7%, was due to an increase, both in the U.S. and Europe, in the number of customers and an increase in transaction volumes associated with both our new and existing
customers.

37

---



Table of Contents

Comparison
Shopping & Search segment revenue increased to $112.7 million for the year ended December 31, 2007 compared to $39.8 million in 2006. The increase
of $72.9 million was primarily attributable to the acquisition of MeziMedia in July 2007 as well as growth in our historical European comparison shopping operations.

Technology
segment revenue was $23.7 million for the year ended December 31, 2007 compared to $18.8 million in 2006, an increase of $5.0 million, or 26.4%.
The increase in revenue was primarily related to higher volumes of ad serving, both domestically and in Europe, during the year ended December 31, 2007 compared to the same period of the
prior year.

Cost of Revenue and Gross Profit.Consolidated cost of revenue was $188.7 million for the year ended December 31, 2007
compared to
$145.0 million in 2006, an increase of $43.7 million, or 30%. The consolidated gross margin decreased from 71.5% for the year ended December 31, 2006 to 69.4% for the year ended
December 31, 2007. This decrease in consolidated gross margin is primarily a result of the lower gross margins experienced by our Media segment in 2007 as described more fully below.

Cost
of revenue for the Media segment increased $20.3 million, or 16.9%, to $140.6 million for the year ended December 31, 2007 compared to $120.3 million in
2006. Our Media segment gross margin decreased to 61.6% for the year ended December 31, 2007 compared to 66.0% for the same period in 2006. The decrease in Media segment gross margin resulted
primarily from a lower mix of promotion-based lead generation revenue, which generates a higher gross margin than other components of Media segment revenue due largely to the classification of certain
online advertising costs as sales and
marketing expense and not as cost of revenue. These online advertising costs are classified as sales and marketing expense as they are not directly related to a revenue-generating event.

Cost
of revenue for the Affiliate Marketing segment was $13.0 million for the year ended December 31, 2007 compared to $10.6 million in 2006. Our Affiliate Marketing
segment gross margin remained relatively consistent at 88.8% in 2007 compared to 89.2% in 2006.

Cost
of revenue for the Comparison Shopping & Search segment was $33.7 million for the year ended December 31, 2007 compared to $11.3 million in 2006. The
increase in cost of revenue was primarily due to the acquisition of MeziMedia in July 2007. Our Comparison Shopping & Search segment gross margin decreased to 70.1% for 2007 from 71.7%
in 2006 due primarily to increased publisher costs associated with third-party revenue-share arrangements and the impact of the acquisition of MeziMedia.

Technology
segment cost of revenue was $3.9 million for the year ended December 31, 2007 compared to $3.6 million in 2006. Our Technology segment gross margin
increased to 83.7% in 2007 from 81.1% in 2006 due to the operating leverage associated with higher revenue.



Sales and Marketing.Sales and marketing expenses for the year ended December 31, 2007 were $183.3 million compared to
$156.4 million in 2006, an increase of $26.9 million, or 17.2%. Sales and marketing expenses increased primarily due to the inclusion of online advertising costs of MeziMedia, acquired
in July 2007, and increases in our worldwide sales and marketing staff, offset partially by a decrease in online advertising costs in our lead generation marketing business. Our sales and
marketing expenses as a percentage of revenue decreased to 29.7% for the year ended December 31, 2007 compared to 30.7% in 2006 due to the lower online advertising costs in our lead generation
marketing business.

General and Administrative.General and administrative expenses increased to $75.6 million for the year ended December 31,
2007
compared to $55.4 million in 2006, an increase of $20.1 million, or 36.4%. General and administrative expenses increased primarily due to an increase of $5.7 million in stock-
based compensation, a $2.9 million settlement with the FTC, the inclusion of MeziMedia's

38

---



Table of Contents

general
and administrative expenses, higher bad debt expense, and increased compensation costs to support the growth in our business. As a result of these items, our general and administrative
expenses as a percentage of revenue increased to 12.3% for the year ended December 31, 2007 compared to 10.9% in 2006.

Technology.Technology expenses for the year ended December 31, 2007 were $34.4 million compared to $31.4 million in
2006, an
increase of $3.1 million, or 9.8%. The increase in technology expenses was due primarily to the inclusion of MeziMedia's technology expenses, increases in our worldwide technology staff and the
overall growth in our business.

Segment Income from Operations.Media segment income from operations for the year ended December 31, 2007 decreased 5.8%,
or
$5.3 million, to $86.8 million, from $92.2 million in the prior year, and represented 23.7% and 26.1% of Media segment revenue in these respective periods. The decrease in Media
segment operating margin was due to the lower gross margin as noted above.

Affiliate
Marketing segment income from operations for the year ended December 31, 2007 increased 13.5%, or $7.5 million, to $63.2 million, from $55.7 million
in the prior year, and represented 54.5% and 56.5% of Affiliate Marketing segment revenue in these respective periods. The increase in Affiliate Marketing segment income from operations was largely
attributable to the higher revenue as described above. The lower operating margin was due primarily to higher operating costs to support the growth in this business.

Comparison
Shopping & Search segment income from operations for the year ended December 31, 2007 increased to $22.5 million, from $5.3 million in the prior
year, and represented 20.0% and 13.3% of Comparison Shopping & Search segment revenue in these respective periods. The increase in Comparison Shopping & Search segment income from
operations and operating margin was largely attributable to the acquisition of MeziMedia.

Technology
segment income from operations for the year ended December 31, 2007 increased to $10.5 million, from $6.6 million in the prior year, and represented 44.4%
and 35.2% of Technology segment revenue in these respective periods. The increase in Technology segment income from operations and the higher operating margin was attributable to the operating
leverage associated with the higher revenue as described above.

Stock-Based Compensation.Stock-based compensation for the year ended December 31, 2007 was $18.3 million compared to
$11.9 million in 2006. The increase was primarily due to the impact of new stock options granted during 2007.

Amortization of Intangible Assets.Amortization of intangible assets for the year ended December 31, 2007 was
$24.7 million compared to
$19.5 million in 2006. This expense represents the amortization of intangible assets acquired through business combinations. The increase compared to the prior year was due to the intangible
assets purchased in the MeziMedia and Shopping.net acquisitions.

Interest Income and Other, net.Interest income and other, net, was $12.0 million for the year ended December 31, 2007
compared to
$8.0 million for the year ended December 31, 2006. The increase was primarily attributable to the effects of higher average cash and cash equivalents and marketable securities balances
in 2007 as compared to 2006.

Income Tax Expense.For the year ended December 31, 2007, we recorded an income tax expense of $51.4 million compared
to
$47.3 million in 2006. The decrease in the effective income tax rate for the year ended December 31, 2007 to 42.2% from 43.2% for the year ended December 31, 2006 was primarily
due to an increase in tax-exempt interest income earned on our marketable securities during 2007 compared to 2006.

39

---



Table of Contents

Liquidity and Capital Resources

Since our inception, we have financed our operations through working capital generated from operations, equity financing and corporate
development activities. At December 31, 2008, our combined cash and cash equivalents and marketable securities balances totaled $150.4 million.

Net
cash provided by operating activities totaled $130.9 million for the year ended December 31, 2008 compared to $142.5 million in 2007 and $114.2 million in
2006. As our income from operations, excluding stock based compensation and impairment charges, was relatively consistent in 2008 compared to 2007, the decrease in net cash provided by operating
activities of $11.6 million from 2007 to 2008 was primarily due to higher income tax payments in 2008 as compared to 2007. The increase in net cash provided by operating activities of
$28.3 million from 2006 to 2007 was primarily due to an increase in our net income before non-cash depreciation, amortization and stock-based compensation of $20.6 million, and
positive working capital changes.

Net
cash provided by investing activities for the year ended December 31, 2008 of $67.4 million was the result of net sales and maturities of marketable securities of
$168.3 million and cash proceeds from the disposition of businesses of $11.7 million, offset by earnout payments related to the acquisition of MeziMedia of $105.4 million and the
use of $7.2 million for equipment purchases. Net cash used in investing activities for the year ended December 31, 2007 of $110.5 million was the result of net cash used of
$102.1 million, net, related to the acquisition of MeziMedia and $9.3 million used for equipment purchases, offset by proceeds from the net sales and maturities of marketable securities
of $0.9 million. For the year ended December 31, 2006, net cash used in investing activities of $32.5 million was the result of net cash used of $11.1 million for the
acquisition of Shopping.net, $10.2 million for property and equipment purchases, $10.2 million of net purchases of marketable securities, and $1.0 million of additional
consideration paid related to our acquisition of HiSpeed Media in December 2003.

Net
cash used in financing activities for the year ended December 31, 2008 of $148.8 million was primarily attributable to the use of $151.3 million to repurchase
our common stock under our stock repurchase program. Net cash used in financing activities for the year ended December 31, 2007 of $26.3 million was primarily attributable to
$44.0 million used to repurchase our common stock under our stock repurchase program, offset by proceeds of $13.2 million received from the exercises of stock options and
$4.5 million of excess tax benefits from stock option exercises. Net cash used in financing activities for the year ended December 31, 2006 of $54.6 million was primarily
attributable to $103.4 million used to repurchase our common stock under our stock repurchase program as described below under Stock Repurchase Program, offset by proceeds of
$30.4 million received from the exercises of stock options and $18.6 million of excess tax benefits from stock option exercises.

Marketable Securities

Marketable securities as of December 31, 2008 consisted of highly rated corporate securities with maturities of less than two
years and auction rate securities ("ARS") collateralized by student loan portfolios that are insured or government supported. As of December 31, 2008, our marketable securities portfolio, with
a total estimated fair value of $27.9 million, included ARS with a par value of $33.9 million and an estimated fair value of $25.8 million. ARS are designed to provide liquidity
via a dutch auction process that resets the applicable interest rate at predetermined calendar intervals (usually every seven to thirty-five days) and historically have allowed existing
investors to either rollover their holdings, whereby they would continue to own their respective interest in the ARS, or gain immediate liquidity by selling such ARS at par. Beginning in
February 2008, the auctions for our ARS began failing due to insufficient demand for these securities. As a result of these failed auctions, we have been unable to liquidate these securities
and the interest rates on these ARS reset to contractually stipulated "fail rates" that are variable based on short-term municipal bond or other market indices. In

40

---



Table of Contents

the
event we need to sell these ARS, we will not be able to do so until a future auction on these investments is successful, the issuer redeems the outstanding securities, the securities mature, or we
sell the securities in the secondary market.

As
a result of the remaining uncertainty in the market for ARS, we have classified these investments as "non-current" in the accompanying consolidated balance sheet as of
December 31, 2008. Additionally, we have reduced the fair value for these investments from their par value of $33.9 million to an estimated fair value of $25.8 million. Because we
have both the intent and ability to hold the ARS until recovery, we consider this reduction in value to be temporary, and have recorded it as an unrealized loss in accumulated other comprehensive
income.

As
discussed in note 3 "Fair Value Measurements" to our condensed consolidated financial statements, we adopted the provisions of Statement 157 as of January 1,
2008. We have determined that we utilize unobservable (Level 3) inputs in establishing the estimated fair value of the ARS of $25.8 million at December 31, 2008. In periods prior
to February 2008, due to successful auctions, quoted market prices were readily available for these ARS, which would qualify as Level 1 inputs under Statement 157. However, due to the
events discussed above which resulted in the lack of an active market for ARS, and due to the lack of other observable market data with similar characteristics to our ARS holdings, we have estimated
the fair values of these ARS utilizing a discounted cash flow analysis as of December 31, 2008. These analyses consider, among other factors, the collateralization underlying the security, the
creditworthiness of the counterparty, the timing of expected future cash flows, and expectations of when the ARS are expected to have successful auctions. Due to these events, we reclassified all of
our ARS fair value measurements as Level 3 during the first quarter of 2008.

Line of Credit

In November 2008, we entered into a $100 million line of credit with a bank group. The line of credit has a term of three
years and the availability under the line of credit is subject to our meeting certain financial and non-financial covenants, as more fully described in note 15 "Line of Credit" to
our consolidated financial statements. The line of credit provides us with additional financial flexibility for pursuing acquisitions, repurchasing our common stock, and for general corporate
purposes. We did not borrow against the line of credit during 2008, and thus no amount was outstanding against the line of credit at December 31, 2008.

Stock Repurchase Program

In September 2001, our board of directors authorized a stock repurchase program (the "Program") to allow for the
repurchase of shares of our common stock at prevailing market prices in the open market or through unsolicited negotiated transactions. Since the inception of the Program and through
December 31, 2007, our board of directors had authorized a total of $279.1 million for repurchases under the Program and we had repurchased a total of 34.9 million shares of our
common stock for approximately $223.1 million, leaving approximately $56 million available under the Program as of December 31, 2007. During 2008, our board of directors increased
the authorization of the Program by an additional $200 million. During 2008, we repurchased 12.2 million shares of our common stock for $151.3 million, including broker
commissions. As of December 31, 2008, we had $105.0 million available under the Program. The amounts authorized by our board of directors exclude broker commissions.

Repurchases
have been funded from available working capital, and all shares have been retired subsequent to their repurchase. There is no guarantee as to the exact number of shares that
will be repurchased by us, and we may discontinue repurchases at any time that management or our board of directors determines additional repurchases are not warranted.

41

---



Table of Contents

Commitments and Contingencies

Contractual obligations at December 31, 2008 are as follows (in thousands):

Payments due by periodTotal

Less than 1 year

1 to less than 3 years

3 to less than 5 years

More than 5 years

OtherOperating leases(1)

$
16,189

$
6,508

$
7,553

$
2,113

$
15

$
Purchase obligations(2)


3,670


3,625


37


8





Liability for unrecognized tax benefits(3)


62,476














62,476Contingent consideration related to MeziMedia acquisition(4)


144,864


63,676


81,188








Total contractual obligations

$
227,199

$
73,809

$
88,778

$
2,121

$
15

$
62,476


---

Other
commercial commitments as of December 31, 2008 are as follows (in thousands):

Other Commercial CommitmentsTotal

Less than 1 year

1 to less than 3 years

3 to less than 5 years

More than 5 yearsStandby letters of credit

$
543




$
543








The
standby letters of credit are maintained pursuant to certain of the Company's lease agreements. The standby letters of credit remain in effect at declining levels through the terms
of the related leases. Certificates of deposit of $500,000 maintained by the Company at financial institutions

42

---



Table of Contents

that
issued the standby letters of credit are included in cash and cash equivalents as of December 31, 2008.

In
the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to
certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by
third-parties. In addition, we have entered into indemnification agreements with our directors and certain of our officers and employees that will require us, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service as directors, officers or employees. We have also agreed to indemnify certain former officers, directors and employees
of acquired companies in connection with the acquisition of such companies. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our
directors and certain of our officers, employees and former officers, directors and employees of acquired companies, in certain circumstances.

It
is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique
facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses.

Capital Resources

We believe that the combination of: our existing cash and cash equivalents; our liquid marketable securities; our $100 million
line of credit; and our expected future cash flows from operations, will provide us with sufficient liquidity to fund our operations and capital requirements for at least the next twelve months.
However, it is possible that we may need or elect to raise additional funds to fund our activities beyond the next year or to consummate acquisitions of other businesses, products or technologies. We
could raise such funds by selling more stock to the public or to selected investors, or by borrowing, whether under the existing line of credit or a new facility. In addition, even though we may not
need additional funds, we may still elect to sell additional equity securities for other reasons. We cannot assure you that we will be able to obtain additional funds on commercially favorable terms,
or at all. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders may be reduced. In addition, the equity or debt
securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock.

Although
we believe we have sufficient capital to fund our activities for at least the next twelve months, our future capital requirements may vary materially from those now planned. The
amount of capital that we will need in the future will depend on many factors, including:



43

---



Table of Contents



Off-Balance Sheet Arrangements



Critical Accounting Policies and Estimates

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

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





44

---



Table of Contents



45

---



Table of Contents





Year Ended December 31,2008

2007Risk-free interest rates


2.4
%

4.5
%Expected lives (in years)


3.6


3.6Dividend yield


0
%

0
%Expected volatility


55
%

48
%




46

---



Table of Contents





47

---



Table of Contents





48

---



Table of Contents



Recently Issued Accounting Standards

On January 1, 2008, the Company adopted the provisions of SFAS No. 157, "Fair Value Measurements"
("SFAS 157"). SFAS 157 defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value
measurements. In February 2008, the FASB issued FASB Staff Position ("FSP"), "FSP FAS 157-2Effective Date of FASB Statement No. 157"
("FSP 157-2"), which delays the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually).

49

---



Table of Contents

Excluded
from the scope of SFAS 157 are certain leasing transactions accounted for under SFAS No. 13, "Accounting for Leases." The exclusion does not apply to fair value
measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of SFAS 157. The adoption of the provisions of
FSP 157-2 during 2009, are not expected to have a material impact on the Company's consolidated financial position, cash flows or results of operations.

In
April 2008, the FASB issued FSP FAS 142-3, "Determination of Useful Life of Intangible Assets" ("FSP FAS 142-3"). FSP
FAS 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS 142, "Goodwill and Other Intangible Assets."
FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. FSP FAS 142-3 is effective for fiscal
years beginning after December 15, 2008. The Company is currently evaluating the potential impact the adoption of FSP FAS 142-3 will have on its consolidated financial
statements.

In
October 2008, the FASB issued FSP FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active"
("FSP FAS 157-3"). FSP FAS 157-3 clarifies the application of SFAS 157. FSP FAS 157-3 demonstrates how the fair
value of a financial asset is determined when the market for that financial asset is inactive. FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements had not been issued. The implementation of this standard did not have a material impact on the Company's consolidated financial position, cash flows or results
of operations.

In
December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"). SFAS 141R requires that upon initially obtaining control, an acquirer will recognize 100% of the fair values of acquired assets, including goodwill, and
assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be fair valued at the acquisition
date and included on that basis in the purchase price consideration, and transaction costs will be expensed as incurred. SFAS 141R also modifies the recognition for preacquisition
contingencies, such as environmental or legal issues, restructuring plans and acquired research and development value in purchase accounting. SFAS 141R amends SFAS No. 109,
"Accounting for Income Taxes," to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from
continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. SFAS 141R is effective for business combinations for which the
acquisition date is on or after January 1, 2009. There will be no impact upon adoption of SFAS 141R related to previously-completed acquisitions. However, changes in deferred tax assets
or liabilities that arose from previous acquisitions will impact income tax expense in future periods as these adjustments will no longer be recorded to goodwill. The impact of adopting
SFAS 141R in future periods will be dependent on the terms of future business combinations that we may pursue after its effective date.

In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS 160"). This Statement
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to establish accounting and reporting standards for the non-controlling interest in a subsidiary and
for the deconsolidation of a subsidiary. SFAS 160 is required to be adopted simultaneously with SFAS 141R and is effective for the Company on January 1, 2009. The Company does not
currently have any non-controlling interests in its subsidiaries, and accordingly, the adoption of SFAS 160 is not expected to have a material impact on its consolidated financial
position, cash flows or results of operations.

Inflation

Inflation was not a material factor in either revenue or operating expenses during the fiscal years ended December 31, 2008,
2007 and 2006.

50

---





Table of Contents

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

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

Marketable
securities as of December 31, 2008 consisted of highly rated corporate securities with maturities of less than two years, and highly rated auction rate securities
("ARS") collateralized by student loan portfolios that are insured or government supported. ARS are designed to provide liquidity via a dutch auction process that resets the applicable interest rate
at predetermined calendar intervals (usually every seven to thirty-five days) and historically has allowed existing investors to either rollover their holdings, whereby they would continue
to own their respective interest in the ARS, or gain immediate liquidity by selling the ARS at par. See further discussion of our marketable securities portfolio and ARS holdings in the "Liquidity and
Capital Resources" section of Item 7 of this Form 10-K under the header "Marketable Securities".

Management's
internal investment policy requires a weighted-average time to maturity of the overall investment portfolio to be no greater than 365 days and allows for ARS to be
weighted based on the auction reset date. Due to the current illiquidity in the ARS market, we have temporarily excluded our ARS from the determination of compliance with the maturity limitations of
our internal investment policy. As of December 31, 2008, our investments in marketable securities, excluding our ARS, had a weighted-average time to maturity of 28 days. We classify all
of our investments as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax,
reported in a separate component of stockholders' equity. As of December 31, 2008, the net unrealized loss in our investments in marketable securities totaled $8.1 million due to a
temporary decline in fair value of our ARS of $8.1 million, reflecting the current lack of liquidity for these instruments.

During
the year-ended December 31, 2008, our investments in marketable securities yielded an annual effective interest rate of 4.40% and an annual taxable equivalent
yield of 5.50%. If interest rates were to decrease 100 basis points, the result would be an annual decrease in our interest income related to our cash and cash equivalents and marketable
securities of approximately $1.5 million. In addition, if the issuers of our ARS were unable to continue to make the contractual interest payments, the result would be an annual decrease in our
interest income of approximately $1.5 million.

FOREIGN CURRENCY RISK

We transact business in various foreign countries and are thus subject to exposure from adverse movements in foreign currency exchange
rates. This exposure is primarily related to revenue and operating expenses of our foreign subsidiaries, which denominate their transactions primarily in British Pounds, Euros, Swedish Kronor,
Japanese Yen, and Chinese Yuan Renminbi. Due to strengthening of

51

---



Table of Contents

the
United States Dollar in the year ended December 31, 2008, we recorded a loss of $3.6 million primarily related to the requirement to mark-to-market
certain of our intercompany loan balances with our European subsidiaries. This loss is recorded in Interest and other income, net, in our audited consolidated financial statements. However, this
strengthening did not materially impact the reported revenue or income from operations for the year ended December 31, 2008. In the future, if there were an adverse change of 10% in overall
foreign currency exchange rates over an entire year, the result of translations would be a reduction of revenue of approximately $11.1 million, a reduction of income before income taxes of
approximately $1.0 million and a reduction of net assets, excluding intercompany balances, of approximately $6.4 million. Historically, we have not hedged our exposure to currency
exchange rate fluctuations. Accordingly, we may experience economic loss and a negative impact on earnings, cash flows or equity as a result of foreign currency exchange rate fluctuations. We assess
the need to utilize financial instruments to hedge currency exchange rate exposures on an ongoing basis. As of December 31, 2008, we had $32.9 million in cash and cash equivalents and
$20.3 million in total current liabilities denominated in foreign currencies, including British Pounds, Euros, Swedish Kronor, Japanese Yen, and Chinese Yuan Renminbi.

Our
international business is subject to risks typical of an international business, including, but not limited to, differing economic conditions, changes in political climate, differing
tax structures, other regulations and restrictions, and foreign currency exchange rate volatility. Accordingly, our future results could be materially and adversely affected by changes in these or
other factors.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's financial statements, schedules and supplementary data, as listed under Item 15, appear in a separate section of
this annual report on Form 10-K beginning on page F-1.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that the information required to be disclosed in
the Company's reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC's
rules and forms, and that such information is accumulated and communicated to management, including the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate,
to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In
connection with the preparation of this annual report on Form 10-K as of December 31, 2008, an evaluation was performed under the supervision and with the
participation of the Company's management, including the CEO and CFO, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act). Based on this evaluation, the Company's CEO and CFO have concluded that the Company's disclosure controls and procedures are effective as of
December 31, 2008 to provide reasonable assurance that the information required to be disclosed by it in reports or submitted under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the

52

---



Table of Contents

SEC
and that such information is accumulated and communicated to management, including the Company's CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. The
Company's internal control over financial reporting includes those policies and procedures that:



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect financial statement misstatements. Also, projections of any evaluation of
internal control effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

The
Company's management has assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2008. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") inInternal Control-Integrated Framework.
Based on this evaluation, the Company's management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2008.

The
effectiveness of the Company's internal control over financial reporting as of December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which appears in this annual report on Form 10-K.

Changes in Internal Control over Financial Reporting

Additionally, the Company's Chief Executive Officer and Chief Financial Officer have determined that there have been no changes to the
Company's internal control over financial reporting during the three-month period ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION



53

---





Table of Contents

PART III.

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated by reference from our definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders to be held on or about April 16, 2009.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from our definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders to be held on or about April 16, 2009.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table provides aggregated information with respect to our compensation plans under which equity securities of ValueClick
are authorized for issuance as of December 31, 2008:

Plan category

Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights(1)

Number of securities
remaining available
for future issuance
under equity
compensation plans(3)Equity compensation plans approved by security holders


4,733,434

$
13.45


6,107,255Equity compensation plans not approved by security holders(2)


219,835

$
39.19


Total


4,953,269

$
14.59


6,107,255


---

The
remaining information required by this Item is incorporated by reference from our definitive Proxy Statement for the 2009 Annual Meeting of Stockholders to be held on or about
April 16, 2009.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference from our definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders to be held on our about April 16, 2009.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from our definitive Proxy Statement for the 2009 Annual Meeting of
Stockholders to be held on or about April 16, 2009.

54

---





Table of Contents

PART IV.

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

PageValueClick, Inc. Consolidated Financial StatementsReport of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets at December 31, 2008 and 2007

F-3Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006

F-4Consolidated Statements of Stockholders' Equity for the years ended December 31, 2008, 2007 and 2006

F-5Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

F-6Notes to Consolidated Financial Statements

F-7




Schedule IIValuation and Qualifying Accounts


F-40




55

---



Table of Contents



Exhibit Number

Description of Document2.1(1)

Amended and Restated Agreement and Plan of Merger, dated as of July 24, 2007 and effective as of July 13, 2007, by and among ValueClick, MM Acquisition Corp. and MeziMedia2.2(2)

Agreement and Plan of Merger, dated as of June 13, 2005, by and among ValueClick and E-Babylon, Inc.2.3(3)

Agreement and Plan of Merger, dated as of June 10, 2005, by and among ValueClick, Spider Acquisition Corporation and Web Marketing Holdings, Inc.2.4(4)

Agreement and Plan of Merger and Reorganization, dated as of August 10, 2005, among ValueClick, Fastclick, Inc. and FC Acquisition Sub, Inc.2.5(5)

Agreement and Plan of Merger, dated as of August 6, 2004, by and among alueClick and Pricerunner AB2.6(6)

Stock Purchase Agreement, dated January 29, 2004, by and among ValueClick and Livedoor Co., Ltd (formerly Edge Co., Ltd), a Japanese Corporation2.7(7)

Agreement and Plan of Merger, dated as of December 7, 2003, by and among ValueClick, HS Acquisition Corporation and HiSpeed Media, Inc.2.8(8)

Agreement and Plan of Merger, dated as of October 9, 2003, by and among ValueClick, NCJ Acquisition Corporation and Commission Junction, Inc.2.9(9)

Agreement and Plan of Merger, dated as of May 30, 2003, by and among ValueClick, Search123.com Acquisition Corporation and Search1233.1(10)

Second Amended and Restated Certificate of Incorporation of ValueClick3.2(11)

Amended and Restated Bylaws of ValueClick4.1

See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and Bylaws for ValueClick, Inc. defining the rights of holders of common stock of ValueClick, Inc.4.2(12)

Specimen stock certificate for the ValueClick common stock4.3(13)

Rights Agreement, dated as of June 4, 2002, between ValueClick, Inc. and Mellon Investor Services LLC, a New Jersey limited liability company, which includes the form of Certificate of Designation for
the Series A junior participating preferred stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Series A Preferred Stock as Exhibit C10.1(14)

Form of Indemnification Agreement by and between ValueClick and directors and executive officers10.2(12)

Deed of Assignment, dated January 1, 1999 by and between Web-Ignite Corporation and ValueClick10.3(12)

Trademark Assignment, dated as of May 1, 1998 from Web-Ignite Corporation to ValueClick10.4(12)

Exchange Agreement, dated December 31, 1998, by and between ValueClick and ValueClick, LLC10.5(12)

Bill of Sale and Assignment and Assumption of Liabilities, dated December 31, 199810.6(12)

License and Option Agreement, dated January 1, 1999, by and between ValueClick, LLC and ValueClick Japan, Inc. in effect from January 1, 1999 to December 17, 199910.7(12)

Share Purchase Agreement, dated December 31, 1999, by and between ValueClick and James R. Zarley10.8(12)

License Agreement, dated August 17, 1999, between ValueClick and ValueClick Europe, Limited


56

---



Table of Contents

Exhibit Number

Description of Document10.9(15)

1999 Stock Option Plan, as amended, and form of option agreement10.10(16)

2002 Stock Incentive Plan and form of option agreement10.11(17)

2007 Employee Stock Purchase Plan and form of subscription agreement10.12(23)

Key Employee Agreement between ValueClick and James R. Zarley dated February 7, 200810.13(18)

Key Employee Agreement between ValueClick and Samuel J. Paisley dated January 1, 200210.14(24)

Key Employee Agreement between ValueClick and Peter Wolfert dated February 7, 200810.15(25)

Key Employee Agreement between ValueClick and Tom A. Vadnais dated February 7, 200810.16(26)

Key Employee Agreement between ValueClick and John P. Pitstick dated February 7, 200810.17(27)

Key Employee Agreement between ValueClick and Scott P. Barlow dated February 7, 200810.18(12)

Intercompany License Agreement dated December 19, 1999, between ValueClick and ValueClick Japan, Inc.10. 19(28)

Key Employee Agreement between ValueClick and David Yovanno dated February 7, 2008.10.20(20)

Credit Agreement dated as of November 14, 2008 by and among ValueClick, Inc., Wells Fargo Bank, National Association (as Administrative Agent, Swing Line Lender and L/C Issuer), and certain other financial
institutions from time to time party thereto.10.21(21)

Security Agreement dated as of November 14, 2008 by and among ValueClick, Inc., Hi-Speed Media, Inc., Web Marketing Holdings, LLC, Web Clients, LLC, I-Deal Direct Interactive, LLC, Mezi Media,
 Inc., Search123.com Inc., Mediaplex, Inc., Be Free, Inc., Commission Junction, Inc. and Wells Fargo Bank, National Association.10.22(22)

Guaranty Agreement dated as of November 14, 2008 by Hi-Speed Media, Inc., Web Marketing Holdings, LLC, Web Clients, LLC, I-Deal Direct Interactive, LLC, Mezi Media, Inc.,
Search123.com Inc., Mediaplex, Inc., Be Free, Inc., and Commission Junction, Inc. in favor of Wells Fargo Bank, National Association.21.1

Subsidiaries of ValueClick23.1

Consent of PricewaterhouseCoopers LLP31.1

Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of CFO Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


---

57

---



Table of Contents

58

---



Table of Contents

59

---





Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PageValueClick, Inc. Consolidated Financial StatementsReport of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets at December 31, 2008 and 2007

F-3Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006

F-4Consolidated Statements of Stockholders' Equity for the years ended December 31, 2008, 2007 and 2006

F-5Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

F-6Notes to Consolidated Financial Statements

F-7Schedule IIValuation and Qualifying Accounts

F-40


F-1

---





Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
ValueClick, Inc.

In
our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of
ValueClick, Inc. and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on
our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.

As
discussed in Note 9 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions in 2007.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/
PricewaterhouseCoopers LLP

Los
Angeles, California
February 27, 2009

F-2

---





Table of Contents

VALUECLICK, INC.        CONSOLIDATED BALANCE SHEETS

As of December 31,2008

2007(in thousands,
except share data)AssetsCurrent assets:Cash and cash equivalents

$
122,487

$
82,767Marketable securities


2,175


170,691Accounts receivable, net of allowances of $5,886 and $6,535 as of December 31, 2008 and 2007, respectively


108,611


126,605Prepaid expenses and other current assets


5,155


6,270Income taxes receivable


4,313


4,448Deferred tax assets


11,047


8,067Total current assets


253,788


398,848Marketable securities, less current portion


25,750


34,059Property and equipment, net


15,514


19,357Goodwill


172,583


439,532Intangible assets acquired in business combinations, net


80,042


112,979Deferred tax assets, less current portion


53,661


4,346Other assets


1,941


1,901Total assets

$
603,279

$
1,011,022Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable and accrued expenses

$
173,407

$
215,453Income taxes payable


1,722


1,943Deferred tax liabilities


15


Deferred revenue


1,461


1,803Total current liabilities


176,605


219,199Income taxes payable, less current portion


71,021


74,863Deferred tax liabilities, less current portion


2,174


3,787Other non-current liabilities





3,240Total liabilities


249,800


301,089Commitments and contingencies (note 16)Stockholders' equity:Convertible preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued or outstanding at December 31, 2008 and
2007





Common stock, $0.001 par value; 500,000,000 shares authorized; 86,743,612 and 98,211,949 shares issued and outstanding at December 31, 2008
and 2007, respectively


87


98Additional paid-in capital


607,143


653,430Accumulated other comprehensive income (loss)


(17,715
)

9,279Retained earnings (accumulated deficit)


(236,036
)

47,126Total stockholders' equity


353,479


709,933Total liabilities and stockholders' equity

$
603,279

$
1,011,022


The
accompanying notes are an integral part of these consolidated financial statements.

F-3

---





Table of Contents

VALUECLICK, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended December 31,2008

2007

2006(in thousands, except per share data)Revenue

$
625,806

$
616,508

$
509,108Cost of revenue


204,052


188,686


144,963Gross profit


421,754


427,822


364,145Operating expenses:Sales and marketing (includes stock-based compensation of $16,196, $4,964 and $4,394 for 2008, 2007 and 2006, respectively)


181,128


183,313


156,425General and administrative (includes stock-based compensation of $31,154, $10,930 and $5,247 for 2008, 2007 and 2006, respectively)


98,098


75,555


55,411Technology (includes stock-based compensation of $5,133, $2,397 and $2,226 for 2008, 2007 and 2006, respectively)


39,278


34,439


31,354Amortization of intangible assets


28,882


24,745


19,490Impairment of goodwill and intangible assets


322,000





Total operating expenses


669,386


318,052


262,680Income (loss) from operations


(247,632
)

109,770


101,465Interest income and other, net


2,173


12,026


7,982Income (loss) before income taxes


(245,459
)

121,796


109,447Income tax expense (benefit)


(26,971
)

51,448


47,276Income (loss) from continuing operations


(218,488
)

70,348


62,171Discontinued operations (Note 5):Income (loss) from discontinued operations, net of tax


(608
)

264


403Gain on disposition, net of tax


4,984





Net income from discontinued operations


4,376


264


403Net income (loss)

$
(214,112
)
$
70,612

$
62,574Basic net income (loss) per common shareContinuing operations

$
(2.37
)
$
0.71

$
0.62Discontinued operations


0.05





0.01$
(2.32
)
$
0.71

$
0.63Diluted net income (loss) per common shareContinuing operations

$
(2.37
)
$
0.70

$
0.61Discontinued operations


0.05





0.01$
(2.32
)
$
0.70

$
0.62Weighted-average shares used to calculate net income (loss) per common share:Basic


92,325


99,224


99,600Diluted


92,325


100,518


101,721


The
accompanying notes are an integral part of these consolidated financial statements.

F-4

---





Table of Contents

VALUECLICK, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Preferred Stock

Common Stock





Accumulated
Other
Comprehensive
Income (Loss)

Retained
Earnings
(Accumulated
Deficit)Additional
Paid-In
Capital

Deferred
Stock-Based
Compensation

Total
Stockholders'
EquityShares

Amount

Shares

Amount(in thousands, except share data)Balance at December 31, 2005








101,897,934

$
102


617,612

$
(638
)
$
(2,958
)
$
4,425

$
618,543Reclassification of deferred stock-based compensation in connection with the adoption of Statement of Financial Accounting Standards No. 123(R)














(638
)

638








Non-cash, stock-based compensation














10,410











10,410Shares issued in connection with employee stock programs








4,419,809


4


30,377











30,381Repurchase and retirement of common stock








(6,904,419
)

(7
)

(41,914
)







(61,505
)

(103,426
)Tax benefit from stock option exercises














17,037











17,037Comprehensive income:Net income























62,574


62,574Change in market value of marketable securities, net of tax




















753





753Foreign currency translation




















7,437





7,437Total comprehensive income


























70,764Balance at December 31, 2006








99,413,324


99


632,884





5,232


5,494


643,709Non-cash, stock-based compensation














18,332











18,332Shares issued in connection with employee stock programs








1,102,184


1


13,209











13,210Repurchase and retirement of common stock








(2,303,559
)

(2
)

(15,055
)







(28,980
)

(44,037
)Tax benefit from stock option exercises














4,060











4,060Comprehensive income:Net income























70,612


70,612Change in market value of marketable securities, net of tax




















685





685Foreign currency translation




















3,362





3,362Total comprehensive income


























74,659Balance at December 31, 2007








98,211,949


98


653,430





9,279


47,126


709,933Non-cash, stock-based compensation














53,376











53,376Shares issued in connection with employee stock programs








714,954


1


6,849











6,850Repurchase and retirement of common stock








(12,183,291
)

(12
)

(82,196
)







(69,050
)

(151,258
)Tax benefit shortfall from employee stock transactions














(44
)










(44
)Repurchase of employee stock options














(5,029
)










(5,029
)Tax effect related to the repurchase of employee stock options














(19,243
)










(19,243
)Comprehensive loss:Net loss























(214,112
)

(214,112
)Change in market value of marketable securities, net of tax




















(8,344
)




(8,344
)Foreign currency translation




















(18,650
)




(18,650
)Total comprehensive loss


























(241,106
)Balance at December 31, 2008




$



86,743,612

$
87

$
607,143

$


$
(17,715
)
$
(236,036
)
$
353,479


The accompanying notes are an integral part of these consolidated financial statements.

F-5

---





Table of Contents

VALUECLICK, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended December 31,2008

2007

2006(in thousands)Cash flows from operating activities:Net income (loss)

$
(214,112
)
$
70,612

$
62,574Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization expense


39,264


35,706


31,065Provision for doubtful accounts and sales credits


7,212


7,762


4,818Non-cash, stock-based compensation


53,376


18,332


10,410Impairment of goodwill and intangible assets


322,000





Gain on disposition of businesses, net of tax


(4,984
)




Benefit from deferred income taxes


(55,520
)

(15,954
)

(5,686
)Tax benefit from stock option exercises


442


4,289


18,480Excess tax benefit from stock option exercises


(599
)

(4,508
)

(18,569
)Changes in operating assets and liabilities, net of effects of acquisitions:Accounts receivable


5,174


(16,504
)

(34,694
)Prepaid expenses, inventories and other assets


(843
)

327


(2,851
)Accounts payable and accrued expenses


2,703


12,789


19,727Income taxes receivable/payable


(20,021
)

29,249


29,870Deferred revenue


(240
)

532


(525
)Other non-current liabilities


(2,951
)

(107
)

(383
)Net cash provided by operating activities


130,901


142,525


114,236Cash flows from investing activities:Proceeds from the maturities and sales of marketable securities


207,971


324,675


228,776Purchases of marketable securities


(39,660
)

(323,745
)

(238,940
)Acquisition of businesses, net of cash acquired


(105,419
)

(102,126
)

(12,077
)Proceeds from disposition of businesses, net of cash disposed and taxes paid


11,746





Purchases of property and equipment


(7,227
)

(9,344
)

(10,244
)Net cash provided by (used in) investing activities


67,411


(110,540
)

(32,485
)Cash flows from financing activities:Repurchases and retirement of common stock


(151,258
)

(44,037
)

(103,426
)Repurchase of employee stock options


(5,029
)




Proceeds from exercises of stock options


6,850


13,210


30,381Repayment of short-term debt and capital lease obligations








(169
)Excess tax benefit from stock option exercises


599


4,508


18,569Net cash used in financing activities


(148,838
)

(26,319
)

(54,645
)Effect of foreign currency translations


(9,754
)

332


2,788Net increase in cash and cash equivalents


39,720


5,998


29,894Cash and cash equivalents, beginning of period


82,767


76,769


46,875Cash and cash equivalents, end of period

$
122,487

$
82,767

$
76,769Supplemental disclosures of cash flow information:Cash paid for interest

$


$


$
3Cash paid for income taxes, net

$
50,346

$
37,491

$
5,447


The accompanying notes are an integral part of these consolidated financial statements.

F-6

---





VALUECLICK, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization and Basis of Presentation

ValueClick, Inc. and its subsidiaries ("ValueClick" or "the Company") offer a suite of products and services that enable
marketers to advertise and sell their products through all major online marketing channelsdisplay advertising, lead generation marketing, email marketing, search marketing, comparison
shopping, and affiliate marketing. The Company also offers technology infrastructure tools and services that enable marketers to implement and manage their own online display advertising and email
campaigns, and that assist online publishers with management of their website inventory. The broad range of products and services that the Company provides enables its customers to address all aspects
of their online marketing process, from strategic planning through
execution, including results measurement and campaign refinements. The Company derives its revenue from four business segments. These business segments are presented on a worldwide basis and include:
Media, Affiliate Marketing, Comparison Shopping & Search, and Technology. These business segments reflect a change in the Company's reporting structure during 2008, as more fully explained in
note 17.

MEDIAValueClick's Media segment provides a comprehensive suite of online marketing services and tailored programs that help
marketers create and increase awareness for their products and brands, attract visitors and generate leads and sales through the Internet. The Company's Media segment offers marketers a range of
online media solutions in the categories of display advertising, lead generation marketing and email marketing. The Company has aggregated thousands of online publishers to provide marketers with
access to one of the largest display advertising networks. Prior to October 2008, the Company also sold a limited number of consumer products directly to end-user customers through
Company-owned e-commerce websites. The Company divested its interest in the e-commerce websites in October 2008 as further discussed in note 5. The Company's
Media services are sold on a variety of pricing models, including cost-per-lead ("CPL"), cost-per-action ("CPA"),
cost-per-thousand-impression ("CPM"), and cost-per-click ("CPC").

AFFILIATE MARKETINGValueClick's Affiliate Marketing segment, through the combination of: a large-scale
pay-for-performance model built on the Company's proprietary technology platforms; marketing expertise; and a large, quality advertising network, enables the Company's
customers to develop their own fully-commissioned online sales force comprised of third-party affiliate publishers. Affiliate Marketing segment revenues are driven primarily by variable compensation
that is generally based on either a percentage of commissions paid to affiliates or on a percentage of transaction revenue generated from the programs managed with the Company's affiliate marketing
platforms.

COMPARISON SHOPPING & SEARCHValueClick's online comparison shopping destination websites enable consumers to research
and compare products from among thousands of online and/or offline merchants using the Company's proprietary technology. The Company gathers product and merchant data and organizes it into
comprehensive catalogs on its destination websites, along with relevant consumer and professional reviews. The Company's service is free for consumers, and customers primarily pay the Company on a CPC
basis for traffic delivered to the customers' websites from listings on the Company's websites. Search123 is ValueClick's self-service paid search offering that generates its
traffic primarily through syndication relationships with other search engines, Web portals and content websites. Search syndication revenues are driven primarily on a CPC basis. Comparison
Shopping & Search segment services are offered through the Company's wholly-owned subsidiaries Pricerunner, MeziMedia, and Search 123. Pricerunner operates comparison shopping destination
websites in the United Kingdom, Sweden, the United States, Germany, France, Denmark, and Austria. MeziMedia, acquired in July 2007, operates comparison shopping destination
websites in the

F-7

---



United States,
Japan and Europe, primarily under the Smarter.com, Shopica.com and Couponmountain.com brand names. Search 123 operates primarily in Europe.

TECHNOLOGYValueClick's Technology segment operates through its wholly-owned subsidiary Mediaplex. Mediaplex Systems was also
included in the Company's Technology segment until its divestiture in October 2008 as further discussed in note 5 to the consolidated financial statements.

Mediaplex
is an application services provider ("ASP") offering technology products and services that enable marketers to implement and manage their online advertising across multiple
channels including display, email, paid search, natural search, on-site, offline and affiliate. Mediaplex's MOJO® product suite is supported by a single proprietary technology
platform, which has the ability to manage all aspects of online advertising from campaign implementation to real-time behavioral targeting to enterprise-level cross channel analysis.
Revenues are primarily driven by software access and usage fees which are priced on a CPM or email-delivered basis.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany
transactions and balances have been eliminated in consolidation.

The
consolidated financial statements include the accounts of the Company and its subsidiaries from the acquisition date of majority voting control and through the date of disposition,
if any.

Basis of Presentation and Use of Estimates

Accounting principles generally accepted in the United States require management of the Company to make estimates and
assumptions in the preparation of these consolidated financial statements that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.

The
most significant areas that require management judgment and which are susceptible to possible change in the near term include the Company's revenue recognition, allowance for
doubtful accounts and sales credits, investments, stock-based compensation, income taxes, goodwill and other intangible assets, and contingencies and litigation. The accounting policies for these
areas are discussed elsewhere in these consolidated financial statements.

Cash and Cash Equivalents

The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three
months or less to be cash equivalents. At December 31, 2008 and 2007, cash equivalents consisted primarily of money market accounts.

Marketable Securities

Marketable securities are classified as available-for-sale and accordingly are recorded at fair value with
unrealized gains and losses reflected as a separate component of stockholders' equity titled accumulated other comprehensive income (loss), net of tax, until realized or until a determination is made
that an other-than-temporary decline in market value has occurred. Factors considered by management in assessing whether an other-than-temporary
impairment has occurred include: the nature of the investment; whether the decline in fair value is attributable to specific adverse conditions affecting the investment; the financial condition of the
investee; the severity and the duration of the impairment; and whether the Company has the ability to hold the investment for a period of time which may be sufficient to recover the investment, or to
maturity. When it is determined that an other-than-temporary impairment has occurred, the investment is written down to its fair value at the

F-8

---



end
of the period in which it is determined that an other-than-temporary decline has occurred, and the Company recognizes a corresponding loss for the amount of the unrealized
loss not previously recognized. The cost of marketable securities sold is based upon the specific identification method. The Company recorded unrealized losses of $8.1 million in other
comprehensive income as a result of temporary declines in fair value of its marketable securities during the year ended December 31, 2008. Fair value of the Company's marketable securities is
determined based upon quoted market rates when available. Refer to notes 2 and 3 for additional details on the Company's determination of fair value of its auction rate securities.
Additionally, see note 2 for further details on the Company's marketable securities portfolio and events that occurred in 2008 that impacted the classification of auction rate securities in the
Company's consolidated balance sheets.

Accounts Receivable and Allowance for Doubtful Accounts and Sales Credits

Trade receivables are stated at gross invoice amount less an allowance for doubtful accounts and sales credits.

The
Company estimates its allowance for doubtful accounts using two methods. First, the Company evaluates specific accounts where information indicates the Company's customers may have
an inability to meet financial obligations, such as due to bankruptcy, and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, the Company uses assumptions
and judgment, based on the best available facts and circumstances, to record a specific allowance for those
customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is
received. Second, an allowance is established for all customers based on a range of loss percentages applied to receivables aging categories based upon the Company's historical collection and
write-off experience. The amounts calculated from each of these methods are analyzed to determine the total amount of the allowance for doubtful accounts. The Company also estimates an
allowance for sales credits based upon its historical sales credits experience.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization
expense are computed using the straight-line method over the estimated useful lives of the assets, generally, three years for computer equipment and purchased software, three to five years
for furniture and equipment, the shorter of five years or the term of the lease for leasehold improvements, three years for vehicles, and 30 years for buildings.

Business Combinations

The Company accounts for its acquisitions utilizing the purchase method of accounting. Under the purchase method of accounting, the
total consideration paid is allocated to the underlying assets and liabilities, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the
net tangible and identifiable intangible assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities, identifiable intangible assets in particular,
is subjective in nature and often involves the use of significant estimates and assumptions including, but not limited to: estimates of revenue growth rates; determination of appropriate discount
rates; estimates of advertiser and publisher turnover rates; and estimates of terminal values. These assumptions are generally made based on available historical information. Definite-lived
identifiable intangible assets are amortized on a straight-line basis, as this basis approximates the expected cash flows from the Company's existing definite-lived identifiable intangible
assets.

F-9

---



Goodwill

The Company tests goodwill for impairment in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 142, "Goodwill and Other Intangible Assets." Accordingly, the Company tests for impairment of goodwill annually as of December 31 at the reporting unit level or whenever
events or circumstances indicate that goodwill might be impaired. The Company has determined its reporting units based on the guidance in SFAS No. 142 and Emerging Issues Task
Force ("EITF") Issue D-101, "Clarification of Reporting Unit Guidance in Paragraph 30 of FASB Statement No. 142." As of December 31, 2008, the Company's reporting
units consisted of the Media, Affiliate Marketing, Comparison Shopping & Search, and Technology operating segments. The impairment test is a two-step process, whereby in the first
step, the Company compares the estimated fair value of the reporting unit with the reporting unit's carrying amount, including goodwill. The Company generally determines the estimated fair value of
each reporting unit using a discounted cash flow approach, giving consideration to the market valuation approach. If the carrying amount of a reporting unit exceeds the reporting unit's fair value,
the Company performs the second step of the goodwill impairment test to determine the amount of impairment, if any. Due to the weakening economy and the significant decline of the Company's stock
price, the Company determined that there was an impairment of goodwill for the year ended December 31, 2008. See note 6 for a discussion of the impairment charge taken. For the years
ended December 31, 2007 and 2006, there was no impairment of goodwill.

Long-lived Assets

Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets," which generally requires the assessment of these assets for recoverability
when events or circumstances indicate a potential impairment exists. Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and
other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of
the assets; significant negative industry or economic trends; a significant decline in the Company's stock price for a sustained period of time; and changes in the Company's business strategy. In
determining if an impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If an impairment is indicated based on a
comparison of the assets' carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the
assets. During the year ended December 31, 2008, as a result of the weakening economy and revenue results for certain businesses that were lower than initial expectations, the Company tested
its long-lived assets for impairment, and recorded an impairment loss related to certain identifiable intangible assets. See note 6 for a discussion of the impairment charge taken.
The Company determined that there was no impairment of long-lived assets for the years ended December 31, 2007 and 2006.

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition in Financial
Statements." When arrangements contain multiple deliverables, we allocate revenue to the deliverables based on EITF 00-21, "Revenue Arrangements with Multiple Deliverables."
Accordingly, the Company recognizes revenue when the following criteria have been met: persuasive evidence of an arrangement exists, no significant Company obligations remain, collection of the
related receivable is reasonably assured, and the fees are fixed or determinable.

The
Company's Media and Comparison Shopping & Search segments revenue is recognized in the period that the advertising impressions, click-throughs or actions occur, when
lead-based information is

F-10

---



delivered,
provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured, and the fees are fixed or determinable. The Company acts as a
principal in Media and Comparison Shopping & Search segment transactions in that the Company is the primary obligor to the advertiser customers. In accordance with the provisions of EITF Issue
No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent," ("EITF 99-19"), revenue is recognized in the Company's Media and Comparison
Shopping & Search segments on a gross basis and publisher expenses that are directly related to a revenue-generating event are recorded as a component of cost of revenue.

Revenue
for the Company's Affiliate Marketing segment is generated primarily from: commission fees earned from transactions, including product sales made by the Company's advertiser
customers, occurring on the Company's affiliate marketing networks; fixed monthly fees from program management services; commission fees earned for the Company's search engine marketing ("SEM")
services; and, to a lesser extent, implementation fees. Commission fee revenue from transactions on the Company's affiliate marketing networks and from the Company's SEM services are recognized on a
net basis in accordance with the provisions of EITF 99-19 as the Company acts as an agent in these transactions and the payments to publishers are the contractual obligation
of the advertiser customers. Commission fee revenue is recognized in the period that the Company's advertiser customer generates a sale or other agreed-upon action on the Company's
affiliate marketing networks or as a result of the Company's SEM services, provided that no significant Company obligations remain, collection of the resulting receivable is reasonably assured, and
the fees are fixed or determinable. Program management services fees revenue is recognized over the contractual service period, provided no significant Company obligations remain, collection of the
resulting receivable is reasonably assured, and the fees are fixed or determinable. Implementation fee revenue is recognized over the estimated customer lives, provided no significant Company
obligations remain, collection of the resulting receivable is reasonably assured, and the fees are fixed or determinable.

Revenue
for the Company's Technology segment is generated primarily from fixed monthly fees or monthly transaction volume-based fees earned by the Company for making its technologies
available to the Company's customers on an ASP basis. Such revenue is recognized monthly, provided no significant Company obligations remain, collection of the resulting receivable is reasonably
assured, and the fees are fixed or determinable. The Company also generates a nominal amount of other services fee revenue in its Technology segment. Such other services fee revenue is recognized when
the services are performed, provided no significant Company obligations remain, collection of the resulting receivable is reasonably assured, and the fees are fixed or determinable.

The
Company's customers do not have the right to take possession of the Company's software at any time during or after the term of the relevant customer agreement. Accordingly, as
prescribed by EITF Issue No. 00-3, "Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity's
Hardware," the Company's revenue recognition is outside the scope of Statement of Position ("SOP") No. 97-2, "Software Revenue Recognition."

Deferred
revenue consists primarily of the unrecognized portion of implementation fee revenue for the Company's Affiliate Marketing segment. Prepayments and amounts on deposit from
customers are classified as an advertiser deposit liability.

The
Company estimates a provision for sales returns which is recorded as a reduction to revenue. The provision for sales returns reflects an estimate of commission based fee reversals
related to product returns from consumers of the Company's Affiliate Marketing customers. In determining the estimate for sales returns, the Company relies upon historical data, contract information
and other factors. The estimated provision for sales returns can vary from actual results. More or less product may be returned from consumers of the Company's Affiliate Marketing as compared to what
was

F-11

---



estimated.
These factors and unanticipated changes in the economic and industry environment could make the provision for sales returns estimates differ from actual returns.

Cost of Revenue

Cost of revenue consists of: payments to website publishers that are directly related to a revenue-generating event; labor costs;
depreciation on revenue-producing technologies and Internet access costs. The Company becomes obligated to make payments related to website publishers, online newsletters and email lists in the period
the advertising impressions, click-throughs, actions or lead-based information are delivered or occur. Such expenses are
classified as cost of revenue in the corresponding period in which the revenue is recognized in the accompanying consolidated statement of operations.

Sales and Marketing

Sales and marketing expenses consist primarily of compensation and employee benefits of sales and marketing, network development and
related support teams, certain online and offline advertising costs, travel, trade shows, and marketing materials. Online advertising costs included in sales and marketing expenses are comprised of:
amounts that the Company pays to website publishers that are not directly associated with a revenue-generating event; and amounts that the Company pays to search engines for driving consumer traffic
to the Company's owned and operated websites.

Advertising
costs are expensed as incurred and totaled $103.7 million, $116.9 million and $96.6 million for the years ended December 31, 2008, 2007 and 2006,
respectively.

General and Administrative

General and administrative expenses include facilities costs, executive and administrative compensation and employee benefits,
depreciation, professional services fees, insurance costs, and other general overhead costs.

Technology

Technology expenses include costs associated with the maintenance of the Company's technology platforms, including compensation and
employee benefits associated with the Company's engineering and network operations departments, as well as costs for contracted services and supplies. The Company follows the guidance of
SOP No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." No internal software development costs were capitalized in the years
ended December 31, 2008, 2007 and 2006.

Stock-based Compensation

The Company records stock-based compensation in accordance with SFAS 123(R) (revised 2004), "Share Based Payment".
SFAS 123(R) requires companies to estimate the fair value of stock-based awards to employees and directors on the date of grant using an option-pricing model. The value of the portion of an
award that is ultimately expected to vest is recognized as an expense over the requisite service period using the straight-line attribution method.

In
November 2005, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. FAS 123(R)-3, "Transition Election Related to Accounting for Tax Effects of Share-Based
Payment Awards" ("FSP 123(R)-3"). The Company has elected to adopt the alternative transition method provided in the FASB Staff Position for calculating the tax effects of stock-based compensation
pursuant to SFAS 123(R). The alternative transition method includes a simplified method to establish the beginning balance of the additional paid-in capital pool ("APIC pool") related to the tax
effects of employee and director stock-based compensation, and to determine the subsequent impact on the

F-12

---



APIC
pool and the consolidated statements of cash flows of the tax effects of employee and director stock-based awards that were outstanding upon adoption of SFAS 123(R).

SFAS 123(R)
prohibits recognition of a deferred tax asset for an excess tax benefit that has not been realized. The Company will recognize a benefit from stock-based compensation
in stockholders' equity if an incremental tax benefit is realized by following the ordering provisions of the U.S. tax law. In addition, the Company has elected to account for the indirect
effects of stock-based awards on other tax attributes, such as the research tax credit, through the consolidated statements of operations.

Refer
to note 11 for information on the impact of SFAS 123(R) and the assumptions used to calculate the fair value of share-based employee compensation.

Foreign Currency Translation

The Company's foreign subsidiaries record their assets, liabilities and results of operations in their respective local currencies,
which are their functional currencies. The Company translates its subsidiaries' financial statements into U.S. dollars each reporting period for purposes of consolidation.

Assets
and liabilities of the Company's foreign subsidiaries are translated at the period-end currency exchange rates while revenue, expenses, gains, and losses are
translated at the average currency exchange rates in effect for the period. Except for certain intercompany balances that have been designated as short-term in nature, the effects of these
translation adjustments are reported in a separate component of stockholders' equity titled accumulated other comprehensive income. The effects of the translation adjustments for those intercompany
balances that have been designated as short-term in nature were not significant in the years ended December 31, 2007 and 2006 and were included in general and administrative
expenses. In the first quarter of 2008 and thereafter, the Company began recording the effects of the translation adjustments for these intercompany balances in interest income and other, net, and
these amounts totaled a $3.6 million loss in the year ended December 31, 2008.

Transaction
gains and losses related to transactions with third parties denominated in other than the functional currency were not significant for the years ended December 31,
2008, 2007 and 2006.

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents,
marketable securities and accounts receivable. Cash and cash equivalents are deposited in the local currency with a limited number of financial institutions in the United States and Europe. The
balances in the United States held at any one financial institution are generally in excess of Federal Deposit Insurance Corporation ("FDIC") insurance limits and certain balances in Europe may
not be insured. Marketable securities are held in local currency with two major financial institutions and, with the exception of the Company's investments in certain municipal obligations, are
generally not insured.

Credit
is extended to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support
accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts and sales credits. At December 31, 2008, no customers
accounted for more than 10% of the accounts receivable balance. At December 31, 2007, one customer accounted for approximately 10.8% of the accounts receivable balance. For the year ended
December 31, 2008, one customer accounted for approximately 12.2% of total revenue. For the years ended December 31, 2007 and 2006, no customer comprised more than 10% of
total revenue.

F-13

---



Fair Value of Financial Instruments

The Company's financial instruments, including cash and cash equivalents, net accounts receivable, accounts payable, and accrued
expenses, are carried at historical cost. At December 31, 2008 and 2007, the carrying amounts of these instruments approximated their fair values because of the short-term nature of
these instruments. The Company's marketable securities are carried at fair value as discussed in note 2.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year; and, (ii) deferred tax
consequences of temporary differences resulting from matters that have been recognized in an entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if, based on
the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized. A liability (including interest if
applicable) is established in the consolidated financial statements to the extent a current benefit has been recognized on a tax return for matters that are considered contingent upon the outcome of
an uncertain tax position. Interest and penalties, if any, are included as components of income tax expense and income taxes payable.

The
Company follows the provisions of FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes," ("FIN 48") when accounting for tax contingencies. FIN 48
prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return.
Under FIN 48, tax benefits are initially recognized in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax
authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate
settlement with the tax authority assuming full knowledge of the position and relevant facts. See note 9 for additional information.

Basic and Diluted Net Income Per Common Share

Basic net income per common share is computed by dividing net income by the weighted-average number of shares of common stock
outstanding for the period. Diluted net income per common share is computed using the weighted-average number of common shares outstanding for the period, and, if dilutive, potential common shares
outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, shares issuable under the Company's Employee Stock Purchase
Plan and restricted stock, determined using the treasury stock method. The Company determines potential windfall tax benefits and shortfalls on stock options on an "as if" basis for purposes of
calculating assumed stock option proceeds under the treasury stock method when determining the denominator for diluted net income per common share.

Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income" establishes standards for reporting comprehensive income and its
components in financial statements. Comprehensive income, as defined, includes all changes in equity (net assets) during a period from non-owner sources. The elements of
comprehensive income, other than net income, relate to foreign currency translation adjustments and

F-14

---



unrealized
gains/losses on marketable securities for the years ended December 31, 2008, 2007 and 2006. As of December 31, 2008 and 2007, the accumulated balance of the foreign currency
translation adjustment was a $9.6 million loss and a $9.0 million gain, respectively. As of December 31, 2008, the unrealized loss on marketable securities was
$8.1 million, net of tax and valuation allowance. The Company has recorded a full valuation allowance against the related deferred tax asset associated with the unrealized losses on marketable
securities due to the uncertainty as to whether such losses and related deferred tax asset will be realized. As of December 31, 2007, unrealized gain on marketable securities was $242,000, net
of income tax liability of $170,000 and as of December 31, 2006, unrealized loss on marketable securities was $443,000, net of tax and valuation allowance.

Business Segments

The Company uses the "management approach" defined in SFAS No. 131 "Disclosures About Segments at an Enterprise and
Related Information" ("SFAS 131") to identify its operating segments. The management approach designates the internal organization used by management for making operating decisions and
assessing performance as the basis for identifying the Company's operating segments.

Recently Issued Accounting Standards

On January 1, 2008, the Company adopted the provisions of SFAS No. 157, "Fair Value Measurements"
("SFAS 157"). SFAS 157 defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value
measurements. In February 2008, the FASB issued FASB Staff Position ("FSP"), "FSP FAS 157-2Effective Date of FASB Statement No. 157"
("FSP 157-2"), which delays the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually). Excluded from the scope of SFAS 157 are certain leasing transactions accounted for under
SFAS No. 13, "Accounting for Leases." The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant
to other pronouncements within the scope of SFAS 157. The adoption of the provisions of FSP 157-2 during 2009, is not expected to have a material impact on the Company's
consolidated financial position, cash flows or results of operations.

In
April 2008, the FASB issued FSP FAS 142-3, "Determination of Useful Life of Intangible Assets" ("FSP FAS 142-3"). FSP
FAS 142-3 amends the factors that should be considered in developing the renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS 142, "Goodwill and Other Intangible Assets." FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives.
FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact the adoption of FSP
FAS 142-3 will have on its consolidated financial statements.

In
October 2008, the FASB issued FSP FAS 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active"
("FSP FAS 157-3"). FSP FAS 157-3 clarifies the application of SFAS 157. FSP FAS 157-3 demonstrates how the fair
value of a financial asset is determined when the market for that financial asset is inactive. FSP FAS 157-3 was effective upon issuance, including prior periods for which
financial statements had not been issued. The implementation of this standard did not have a material impact on the Company's consolidated financial position, cash flows or results
of operations.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"). SFAS 141R requires that upon initially obtaining
control, an acquirer will recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited

F-15

---



exceptions,
even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the
purchase price consideration, and transaction costs will be expensed as incurred. SFAS 141R also modifies the recognition for preacquisition contingencies, such as environmental or legal
issues, restructuring plans and acquired research and development value in purchase accounting. SFAS 141R amends SFAS No. 109, "Accounting for Income Taxes," to require the
acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the
combination or directly in contributed capital, depending on the circumstances. SFAS 141R is effective for business combinations for which the acquisition date is on or after January 1,
2009. There will be no impact upon adoption of SFAS 141R related to previously-completed acquisitions. However, changes in deferred tax assets or liabilities that arose from previous
acquisitions will impact income tax expense in future periods as these adjustments will no longer be recorded to goodwill. The impact of adopting SFAS 141R in future periods will be dependent
on the terms of future business combinations that we may pursue after its effective date.

In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS 160"). This Statement
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to establish accounting and reporting standards for the non-controlling interest in a subsidiary and
for the deconsolidation of a subsidiary. SFAS 160 is required to be adopted simultaneously with SFAS 141R and is effective for the Company on January 1, 2009. The Company does not
currently have any non-controlling interests in its subsidiaries, and accordingly, the adoption of SFAS 160 is not expected to have a material impact on its consolidated financial
position, cash flows or results of operations.

2. Marketable Securities

Marketable securities consisted of the following as of December 31, 2008 (in thousands):

Cost

Unrealized
Gains

Unrealized
Losses

Estimated
Fair ValueMunicipal obligations

$
33,850

$


$
(8,100
)
$
25,750Corporate obligations


2,176





(1
)

2,175Total marketable securities

$
36,026

$


$
(8,101
)
$
27,925


Marketable
securities consisted of the following as of December 31, 2007 (in thousands):

Cost

Unrealized
Gains

Unrealized
Losses

Estimated
Fair ValueMunicipal obligations

$
197,462

$
453

$
(39
)
$
197,876U.S. agencies obligations


4,863


5


(1
)

4,867Corporate obligations


2,013





(6
)

2,007Total marketable securities

$
204,338

$
458

$
(46
)
$
204,750


The
following table summarizes the amortized cost and estimated fair value of marketable securities classified by the remaining maturity of the security as of December 31, 2008
(in thousands):

Cost

Estimated
Fair ValueDue within one year

$
2,176

$
2,175Due within one year through five years





Due within five years through ten years





Due after ten years


33,850


25,750Total

$
36,026

$
27,925


Realized
gains and losses from sales and maturities of marketable securities are included in interest income, net, in the consolidated statements of operations and were not significant
for the years ended December 31, 2008, 2007 and 2006. The Company recognizes realized gains and losses upon sale or maturity of marketable securities using the specific identification method.

F-16

---



Table of Contents

The following table summarizes, for all investments in an unrealized loss position, the fair value and gross unrealized losses of investments aggregated by type
of investment instrument and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2008 (in thousands):

Less Than 12 Months

12 Months or Greater

TotalFair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
LossesMunicipal obligations

$
25,750

$
(8,100
)
$


$


$
25,750

$
(8,100
)Corporate obligations


2,175


(1
)







2,175


(1
)Total

$
27,925

$
(8,101
)
$


$


$
27,925

$
(8,101
)


The
following table summarizes, for all investments in an unrealized loss position, the fair value and gross unrealized losses of investments aggregated by type of investment instrument
and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2007 (in thousands):

Less Than 12 Months

12 Months or Greater

TotalFair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
LossesMunicipal obligations

$
10,356

$
(39
)
$


$


$
10,356

$
(39
)U.S. agencies obligations


442





604


(1
)

1,046


(1
)Corporate obligations


2,007


(6
)







2,007


(6
)Total

$
12,805

$
(45
)
$
604

$
(1
)
$
13,409

$
(46
)


Auction Rate Securities ("ARS")

Included in the Company's municipal obligations are auction rate securities totaling $25.8 million and $78.8 million as
of December 31, 2008 and 2007, respectively. ARS are securities that are structured with short-term reset dates of generally less than 90 days but with maturities generally
greater than 10 years. At the end of the reset period, investors can generally sell or continue to hold the securities at par value. The assets underlying these investments are primarily
student loan portfolios that are insured or government backed. The auction events, which have historically provided liquidity for these securities, began failing during the first quarter of 2008, and
there have been no successful auction events for the Company's ARS since that time. The principal amounts associated with the ARS will not be accessible until a successful auction occurs, a buyer is
found outside of the auction process, the issuer calls the security, or the security matures according to contractual terms.

Due
to the auction failures, these ARS do not have a readily determinable market value. As a result, fair values were estimated utilizing discounted cash flow analyses as of
December 31, 2008. These analyses consider, among other factors, the collateralization underlying the security investments, the creditworthiness of the counterparty, the timing of expected
future cash flows, and the expectation of the next time the ARS are expected to have a successful auction (liquidity). These ARS were also compared when possible, to other observable market data with
similar characteristics to the ARS held by the Company.

As
a result of the remaining uncertainty in the market for ARS, the Company has classified these investments as "non-current" assets in the accompanying consolidated balance
sheet as of December 31, 2008. Additionally, the fair value of these investments have been reduced from their par value of $33.9 million to an estimated fair value of
$25.8 million. Because the Company has the intent and ability to hold the ARS until recovery, the decline in fair value is considered temporary, and has

F-17

---



Table of Contents

been
recorded as an unrealized loss in accumulated other comprehensive income. If the Company were to determine that a decline in fair value is other-than-temporary, a charge
would be recorded to earnings in the period such determination was made.

3. Fair Value Measurements

Effective January 1, 2008, the Company adopted the provisions of SFAS 157 for financial assets and liabilities recorded
at fair value and, effective October 10, 2008, the Company adopted FSP No. SFAS 157-3Determining the Fair Value of a Financial Asset When the Market
for That Asset Is Not Active, except as it applies to the nonfinancial assets and nonfinancial liabilities subject to FSP 157-2. SFAS 157 defines fair value,
establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.
Although the adoption of SFAS 157 did not materially impact its financial condition, results of operations, or cash flow, the Company is now required to provide additional disclosures as part
of its consolidated financial statements.

SFAS 157
establishes a three-tier fair value of hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as
fair value measured based on observable inputs such as quoted prices in active markets for identical assets; Level 2, defined as fair value measured based on observable inputs such as quoted
prices in active markets for similar assets, and inputs other than quoted prices in active markets that are either directly or indirectly observable and for identifiable assets in less active markets;
and Level 3, defined as fair value measured based on unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair value
hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The
Company's assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 at December 31, 2008, were as follows
(in thousands):

Fair Value Measurements at Reporting Date UsingDecember 31,
2008

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)Description:Auction rate securities

$
25,750

$


$


$
25,750Other available-for-sale securities


2,175


2,175





Total assets measured at fair value

$
27,925

$
2,175

$


$
25,750


As
discussed in note 2, the Company changed its valuation methodology for ARS to a discounted cash flow analysis during the first quarter of 2008 as quoted prices in an active
market were not available due to the auction failures. Accordingly, these ARS changed from Level 1 to Level 3 within SFAS 157's hierarchy since the Company's initial adoption of
SFAS 157 at January 1, 2008.

F-18

---



Table of Contents

The
following table presents the Company's assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in SFAS 157 at
December 31, 2008 (in thousands):

Fair Value
Measurements Using
Significant
Unobservable Inputs
(Level 3)Auction Rate
SecuritiesBalance at December 31, 2007

$
Transfers to Level 3


33,850Total unrealized losses included in other comprehensive income


(8,100
)Balance at December 31, 2008

$
25,750


4. Recent Business Combinations

MeziMedia.On July 30, 2007, the Company completed the acquisition of MeziMedia, a leading operator of U.S. comparison
shopping
websites. Under the terms of the agreement, the Company acquired all outstanding equity interests in MeziMedia for initial cash consideration of $96.3 million, net of cash acquired of
$18.9 million, plus approximately $700,000 in transaction costs, resulting in a total initial cash consideration of $97.0 million.

The
final allocation of the initial purchase price (excluding contingent consideration) to the assets acquired and liabilities assumed and the useful lives, in years, assigned to
intangible assets is as follows (in thousands):

Cash acquired




$
18,944Other tangible assets acquired





9,540Useful lifeAmortizable intangible assets:Customer relationships


3


2,100Trademarks, trade names and domain names


5


10,400Developed technologies


4


26,700Covenants not to compete


4


7,500Total identifiable intangible assets





46,700Goodwill





58,025Total assets acquired





133,209Liabilities assumed





(17,230
)Total




$
115,979


The
intangible assets were valued using a combination of valuation methods, including future discounted cash flows expected to be generated from the assets, comparison of market prices
for other similar assets, and the cost of replacing the assets. The Company is amortizing each intangible asset on a straight-line basis over the asset's useful life as this method
approximates the pattern in which the economic benefits of the assets are consumed. All of the goodwill resulting from this acquisition is tax deductible.

F-19

---



Table of Contents

In
addition to the initial cash consideration, the shareholders of MeziMedia earned $62.6 million and $106.1 million in contingent cash consideration for achieving certain
revenue and earnings performance targets for the years ended December 31, 2008 and 2007, respectively. The shareholders of MeziMedia may also be entitled to additional contingent cash
consideration based on the achievement by MeziMedia of certain revenue and earnings performance targets for the year ending December 31, 2009. Total cash consideration, which includes the
$97.0 million initial cash consideration and transaction costs and the $62.6 million and $106.1 million cash consideration related to fiscal 2008 and 2007 performance,
respectively, will range between approximately $265.7 million and $348.8 million, depending on whether the performance targets are met for the year ending December 31, 2009. The
cash consideration earned related to MeziMedia's 2008 and 2007 performance of $62.6 million and $106.1 million have been accounted for as additional purchase price and were recorded as
additional goodwill during the years ended December 31, 2008 and 2007, respectively. The $62.6 million earned for 2008 performance was accrued as a liability in the accompanying
consolidated balance sheet as of December 31, 2008 and will be paid in the first quarter of 2009. The $106.1 million earned for 2007 performance was accrued as a liability in the
accompanying consolidated balance sheet as of December 31, 2007 and was paid in February 2008, less an indemnity holdback amount which was paid in January 2009. Future contingent
cash consideration paid, if any, for fiscal 2009 performance will also be accounted for as additional purchase price and added to goodwill at the time the Company is able to determine the amount of
such consideration, when the contingency is resolved.

MeziMedia
provides the Company with additional opportunities to monetize online traffic and expand its overall comparison shopping presence in the United States, China and Japan.
This factor contributed to a purchase price in excess of the fair value of MeziMedia's net tangible and intangible assets acquired, and, as a result, the Company recorded goodwill in connection with
this transaction. The results of MeziMedia's operations are included in the Company's consolidated financial statements beginning on the date of acquisition.

Shopping.net.On December 1, 2006, the Company completed the acquisition of all of the outstanding capital stock of
Shopping.net for an
aggregate purchase price of $13.9 million, consisting of cash consideration of $13.6 million and transaction costs of the acquisition of $253,000. Of the total cash consideration,
$10.9 million was paid on the closing date and the remaining $2.7 million was paid in 2008. Shopping.net, located in the United Kingdom, provides the Company with additional
opportunities to monetize online traffic and expand its overall comparison shopping presence in Europe. This factor contributed to a purchase price in excess of the fair value of Shopping.net's net
tangible and intangible assets acquired, and, as a result, the Company recorded goodwill in connection with this transaction. The results of Shopping.net's operations are included in the Company's
consolidated financial statements beginning on the date of acquisition.

The
historical operating results of acquired entities prior to the respective acquisition dates have not been included in the Company's historical operating results. Pro forma
data (unaudited) for the years ended December 31, 2008 and 2007 as if the MeziMedia acquisition was completed on January 1, 2007 is as follows (in thousands, except per
share data):

2008

2007(actual)

(pro forma)Revenue

$
625,806

$
661,317Net income (loss)

$
(214,112
)
$
73,792Basic net income per common share

$
(2.32
)
$
0.74Diluted net income per common share

$
(2.32
)
$
0.73


These
unaudited, pro forma results of operations are not necessarily indicative of future operating results.

F-20

---



Table of Contents

5. Discontinued Operations

In October 2008, the Company sold two non-core businesses, Mediaplex Systems and the ink-jet
e-commerce business. Mediaplex Systems was included in the Company's Technology operating segment, while the e-commerce business was included in the Media operating segment.
The divestitures generated total gross consideration of $15.9 million and a pretax gain of $10.1 million ($5.0 million, net of income taxes). The Company may also receive up to an
additional $6.5 million in consideration upon the resolution of certain contingencies. Any additional amounts received in the future will be recorded in discontinued operations.

The
following amounts related to Mediaplex Systems and the ink-jet e-commerce business were derived from historical financial information and have been segregated
from continuing operations and reported as discontinued operations (in thousands). The 2007 and 2006 amounts reflect the entire respective fiscal years, while the 2008 amounts reflect activity
through the dispositions in October 2008:

Year Ended December 31,2008

2007

2006Revenues

$
17,837

$
29,220

$
36,628(Loss) income before income taxes from discontinued operations


(1,025
)

449


682Income tax (benefit) expense


(417
)

185


279(Loss) income from discontinued operations, net of tax, before gain on sale of disposal


(608
)

264


403Gain on sale of disposal, net of tax of $5,154


4,984





Income from discontinued operations, net of tax

$
4,376

$
264

$
403


6. Goodwill and Intangible Assets

In accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), the
Company does not amortize goodwill, but rather tests goodwill for impairment, at the reporting unit level, annually as of December 31 or whenever events or circumstances indicate that goodwill
might be impaired. The Company's testing approach utilizes a discounted cash flow analysis corroborated by comparative market multiples to determine the fair value of its reporting units for
comparison to their corresponding book values. If the book value exceeds the estimated fair value of a reporting unit, a potential impairment is indicated and SFAS 142 prescribes the approach
for measuring the impairment amount, if any. After conducting its test as of December 31, 2008, the Company determined that goodwill in its Media and Comparison Shopping & Search
reporting units was impaired by $112.2 million and $209.6 million, respectively. The total goodwill impairment charge of $321.8 million is included in the consolidated results of
operations for the year ended December 31, 2008. The goodwill impairment charge is primarily driven by the significant decline in the Company's stock price during 2008 and the weak economic
environment, which resulted in lower projected cash flows for these reporting units as compared to projections used in goodwill impairment tests completed in prior periods. This non-cash
charge does not impact the Company's ongoing business operations. The tax benefit related to the impairment charge is $51.2 million. No goodwill impairment was recorded as a result of the
Company's annual impairment test for the years ended December 31, 2007 and 2006.

The
Company determined its reporting units based on the guidance in SFAS No. 142 and EITF Issue D-101. As of December 31, 2008, the Company's
reporting units consisted of the Media, Affiliate Marketing, Comparison Shopping & Search, and Technology operating segments. As required by

F-21

---



Table of Contents

SFAS No. 142,
the Company assigned goodwill to its reporting units. Below is assigned goodwill by reporting unit (in thousands):

As of December 31,2008

2007Reporting UnitsMedia

$
119,455

$
232,000Affiliate Marketing


29,840


30,733Comparison Shopping & Search


23,288


176,799Technology





Total goodwill

$
172,583

$
439,532


For
the year ended December 31, 2008, the decrease in goodwill of $112.5 million, $893,000, and $153.5 million for Media, Affiliate Marketing and Comparison
Shopping & Search, respectively, were due to the impairment charge as described above and impact of currency exchange rate fluctuations. The decrease in goodwill for Comparison
Shopping & Search was offset by an increase of $62.6 million in goodwill for the contingent cash consideration earned for achieving certain revenue and earnings performance targets for
the year ended December 31, 2008. As of December 31, 2008, goodwill with a book value of $34.0 million, of which $11.9 million related to the Comparison Shopping &
Search reporting unit and $22.1 million related to the Media reporting unit, is tax deductible. As of December 31, 2007, $185.1 million of goodwill was tax deductible.

The
Company's acquired intangible assets as of December 31, 2008 are being amortized on a straight-line basis over the following weighted-average useful lives
(in years):

Weighted-
Average
Useful LifeCustomer, affiliate and advertiser relationships


7Trademarks, trade names and domain names


8Developed technologies and websites


4Covenants not to compete


3


F-22

---



Table of Contents

The
gross carrying amounts and accumulated amortization of the Company's acquired intangible assets were as follows at December 31, 2008 and 2007 (in thousands):

Gross
Balance

Accumulated
Amortization

Net Carrying
AmountDecember 31, 2008:Customer, affiliate and advertiser relationships

$
81,596

$
(44,793
)
$
36,803Trademarks, trade names and domain names


32,929


(11,739
)

21,190Developed technologies and websites


30,992


(13,784
)

17,208Covenants not to compete


15,819


(10,978
)

4,841Total intangible assets

$
161,336

$
(81,294
)
$
80,042December 31, 2007:Customer, affiliate and advertiser relationships

$
83,445

$
(33,815
)
$
49,630Trademarks, trade names and domain names


38,145


(8,301
)

29,844Developed technologies and websites


31,921


(6,852
)

25,069Covenants not to compete


16,109


(7,673
)

8,436Total intangible assets

$
169,620

$
(56,641
)
$
112,979


In
2008, $2.0 million was removed from the intangible asset balances due to the disposition of the e-commerce business. Additionally, the Company recorded an
impairment charge of $248,000 in 2008 related to developed technologies and websites. The remaining decrease in the gross balance of the intangible assets at December 31, 2008 is primarily due
to foreign currency translation adjustments totaling approximately $5.8 million. In 2007, $46.7 million was added to the intangible asset balances related to the acquisition of
MeziMedia, offset by write-offs of fully amortized intangible asset balances of $9.7 million. Amortization expense related to intangible assets was $28.9 million,
$24.7 million and $19.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. Estimated intangible asset amortization expense for the next five years ending
December 31 and thereafter is as follows (in thousands):

2009

$
25,1062010

$
24,5532011

$
17,5672012

$
7,8882013

$
1,400Thereafter

$
3,528


7. Property and Equipment

Property and equipment consisted of the following (in thousands):

As of December 31,2008

2007Land

$
1,470

$
1,470Building


1,330


1,330Computer equipment and purchased software


46,276


46,845Furniture and equipment


4,412


4,633Vehicles


56


137Leasehold improvements


3,299


2,82756,843


57,242Less: accumulated depreciation and amortization


(41,329
)

(37,885
)$
15,514

$
19,357


F-23

---



Table of Contents

Total depreciation expense, including the amortization of leasehold improvements, for the years ended December 31, 2008, 2007 and 2006 was
$9.6 million, $9.4 million and $8.9 million, respectively.

8. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):

As of December 31,2008

2007Accounts payable, including amounts due to publishers

$
59,941

$
65,904Advertiser deposits


16,026


10,848Accrued salaries and benefits


5,992


9,862Accrued contingent consideration


62,563


106,065Other accrued expenses


28,885


22,774$
173,407

$
215,453


Accrued
contingent consideration of $62.6 million and $106.1 million for the years ended December 31, 2008 and 2007, respectively, represents the contingent cash
consideration earned by MeziMedia for achieving certain revenue and earnings performance targets for the years ended December 31, 2008 and 2007 as per the terms of the merger agreement. These
amounts were paid in February 2009 and February 2008, respectively. See note 4.

9. Income Taxes

The components of income from continuing operations before income taxes are as follows (in thousands):

Year Ended December 31,2008

2007

2006United States

$
(250,425
)
$
110,056

$
103,650Foreign


4,966


11,740


5,797Income before income taxes and minority interest

$
(245,459
)
$
121,796

$
109,447


Income
tax expense attributable to continuing operations is comprised of the following provision (benefit) components (in thousands):

Year Ended December 31,2008

2007

2006Current:Federal

$
19,429

$
49,223

$
38,000State


7,007


14,236


12,410Foreign


1,950


4,263


2,27328,386


67,722


52,683Deferred:Federal


(45,087
)

(10,774
)

(4,271
)State


(10,142
)

(3,570
)

(397
)Foreign


(128
)

(1,930
)

(739
)(55,357
)

(16,274
)

(5,407
)Income tax expense

$
(26,971
)
$
51,448

$
47,276


F-24

---



Table of Contents

Income
tax expense attributable to discontinued operations is $4.7 million, $0.2 million, and $0.3 million for the years ended December 31, 2008, 2007 and
2006, respectively. The effective tax rate attributable to discontinued operations in 2008 is higher than the statutory rate due to the impact of state apportionment.

Income
tax expense of $19.2 million, primarily attributable to an employee stock option tender offer during 2008, was recorded as a decrease to additional paid-in
capital and did not, therefore, result in an expense in the consolidated statement of operations. The income tax benefit of employee stock options exercised during 2007 and 2006 in the amount of
$4.1 million and $17.0 million, respectively, was recorded as an increase to additional paid-in capital and did not, therefore, result in a benefit in the consolidated
statements of operations. For the years ended December 31, 2007 and 2006, the Company recorded a decrease to goodwill of $0.1 million and $2.7 million, respectively, related to
tax benefits from exercises in 2007 and 2006, respectively, of nonqualified employee stock options that were assumed and fully vested at the time of acquisition. No such decreases were recorded in the
year ended December 31, 2008.

The
components of the deferred tax assets and deferred tax liabilities are as follows (in thousands):

As of December 31,2008

2007Deferred tax assets:Net operating loss carryforwards

$
7,904

$
10,338Depreciation and amortization


52,492


9,089Stock options


3,929


5,472State tax


5,865


4,293Unrealized loss on marketable securities


3,515


Deferred book gain on asset sale


2,853


Other


10,625


7,847Gross deferred tax assets


87,183


37,039Valuation allowance


(4,574
)

(989
)Net deferred tax assets


82,609


36,050Deferred tax liabilities:Acquired intangible assets


19,786


27,191Other


304


233Total deferred tax liabilities


20,090


27,424Net deferred tax assets

$
62,519

$
8,626Current portion of net deferred tax assets

$
11,032

$
8,067Long-term portion of net deferred tax assets


51,487


559Net deferred tax assets

$
62,519

$
8,626


In
evaluating the need for a valuation allowance at December 31, 2008 and 2007, the Company evaluated both positive and negative evidence in accordance with the requirements of
SFAS No. 109, "Accounting for Income Taxes." As of December 31, 2008, based upon both positive and negative evidence, the Company determined it is more likely than not that
certain deferred tax assets may not be realizable. As of December 31, 2008 and 2007, the valuation allowance attributable to deferred tax assets was $4.6 million and $1.0 million,
respectively, representing an overall increase of $3.6 million. The increase in valuation allowance relates primarily to unrealized capital losses on marketable securities which the Company
deems more likely than not will expire unutilized. As of December 31,

F-25

---



Table of Contents

2008,
the Company had net operating loss carryforwards for federal and state purposes of $18.1 million and $7.9 million, respectively. The federal and state net operating loss
carryforwards begin to expire in 2019 and 2012, respectively.

A
reconciliation of the beginning and ending amount of unrecognized tax benefits during 2008 and 2007 is as follows (in thousands):

2008

2007Unrecognized tax benefits balance at January 1

$
68,597

$
48,567Add:Additions based on tax positions related to the current year


2,349


19,887Additions for tax positions of prior years


919


364Deduct:Settlements with tax authorities


(120
)

Reductions as a result of lapse of applicable statute of limitations


(8,819
)

(221
)Reductions for tax positions of prior years


(450
)

Unrecognized tax benefits balance at December 31

$
62,476

$
68,597


The
total amount of unrecognized tax benefits of $62.5 million at December 31, 2008, if ultimately recognized, will reduce the Company's annual effective tax rate.

The
Company's policy is to recognize interest and penalties expense, if any, related to uncertain tax positions as a component of income tax expense. For the years ended
December 31, 2008 and 2007, the Company recognized $4.3 million and $3.5 million, respectively, in gross interest and penalties expense related to uncertain tax positions. During
the year ended December 31, 2008, gross interest expense was partially offset by a reversal of prior accrued interest of $2.1 million as a result of the expiration of certain statutes of
limitations. As of December 31, 2008 and 2007, the Company had an accrued liability of $8.5 million and $6.3 million, respectively, for interest and penalties related to uncertain
tax positions. These amounts are included in non-current income taxes payable.

The
Company's uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. These include the 2005 through 2008 tax years for
federal purposes, 1999 and 2004 through 2008 tax years for various state jurisdictions, and 2003 through 2008 tax years for various foreign jurisdictions. The Company is currently under examination by
various state and foreign tax authorities for the 2004 through 2007 tax years and under federal examination for the 2007 tax year. Facts and circumstances could arise in the twelve-month period
following December 31, 2008 that could cause the Company to reduce the liability for unrecognized tax benefits, including, but not limited to, settlement of income tax positions or expiration
of the statutes of limitations. Since the ultimate resolution of uncertain tax positions depends on many factors and assumptions, the Company is not able to estimate the range of potential changes in
the liability for unrecognized tax benefits or the timing of such changes.

F-26

---



Table of Contents

The
overall effective income tax rate for continuing operations differs from the statutory federal tax rate as follows:

Year Ended December 31,2008

2007

2006Tax provision (benefit) based on the federal statutory rate


(35.0
)%

35.0
%

35.0
%State income taxes, net of federal benefit


(0.8
)

5.7


7.1Stock-based compensation


0.4


0.4


0.7Research and experimentation credit


(0.1
)

(0.3
)

(0.6
)Goodwill impairment


27.7





Effects of foreign income





(0.4
)

(0.4
)Adjustment to valuation allowance, net of purchase accounting adjustments





(0.2
)

0.1Other, net


(3.2
)

2.0


1.3Overall effective income tax rate


(11.0
)%

42.2
%

43.2
%


The
Company files a consolidated federal income tax return as well as state and foreign tax returns.

As
of December 31, 2008, withholding and U.S. income taxes have not been provided on $25.3 million of unremitted earnings of certain
non-U.S. subsidiaries because such earnings will be permanently reinvested in foreign operations. The determination of taxes associated with the $25.3 million of unremitted
earnings is not practicable.

10. Capitalization

Share Repurchase Program

In September 2001, the Company's board of directors authorized a stock repurchase program (the "Program") to allow for
the repurchase of shares of the Company's common stock at prevailing market prices in the open market or through unsolicited negotiated transactions. Since the inception of the Program and through
December 31, 2007, the Company's board of directors had authorized a total of $279.1 million for repurchases under the Program and the Company had repurchased a total of
34.9 million shares of its common stock for approximately $223.1 million, leaving approximately $56 million available under the Program as of December 31, 2007.

During
the year ended December 31, 2008, the Company's board of directors increased the authorization of the Program by an additional $200 million. During the year ended
December 31, 2008, the Company repurchased 12.2 million shares of its common stock for $151.3 million, including broker commissions. As of December 31, 2008, the Company had $105.0
million available under the Program. The amounts authorized by the Company's board of directors exclude broker commissions. Repurchases have been funded from available working capital and all shares
have been retired subsequent to their repurchase. There is no guarantee as to the exact number of shares that will be repurchased by the Company, and the Company may discontinue repurchases at any
time that management or the Company's board of directors determines additional repurchases are not warranted.

Stockholder Rights Plan

On June 4, 2002, the board of directors of ValueClick, Inc. declared a dividend of one preferred share purchase right for
each outstanding share of the Company's common stock. The dividend was payable on June 14, 2002 to the stockholders of record at the close of business on that date. Each right entitles the
registered holder to purchase from the Company one unit consisting of one-thousandth of a

F-27

---



Table of Contents

share
of Series A junior participating preferred stock of the Company at a price of $25.00 per unit. The description and terms of the rights are set forth in a Rights Agreement, dated as of
June 4, 2002, by and between the Company and Mellon Investor Services LLC, a New Jersey Limited Liability Company, as Rights Agent.

Until
the earlier to occur of (i) the close of business on the tenth day after a public announcement that a person or group of affiliated or associated persons has acquired
beneficial ownership of 15% or more of the Company's outstanding common stock or (ii) ten business days (or such later date as may be determined by action of the Company's board of
directors prior to such time as any person becomes an acquiring person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer, the consummation of
which would result in the bidder's beneficial ownership of 15% or more of the Company's outstanding common stock (the earlier of such dates being called the distribution date), the rights will
be evidenced by the Company's common stock certificates.

The
rights are not exercisable until the distribution date. The rights will expire at the close of business on June 4, 2012 unless the final expiration date is extended or the
rights are earlier redeemed or exchanged by the Company.

The
Series A junior participating preferred stock purchasable upon exercise of the rights will not be redeemable. Each share of Series A junior participating preferred
stock will be entitled to a dividend of 1,000 times the dividend declared per share of common stock. In the event of liquidation, the holders of the shares of Series A junior
participating preferred stock will be entitled to a payment of 1,000 times the payment made per share of common stock. Each share of Series A junior participating preferred stock will
have 1,000 votes, voting together with the common stock. Finally, in the event of any merger, consolidation or other transaction in which shares of common stock are exchanged, each share of
Series A junior participating preferred stock will be entitled to receive 1,000 times the amount received per share of common stock. These rights are protected by customary
anti-dilution provisions.

The
terms of the rights may be amended by the board of directors of the Company without the consent of the holders of the rights except that from and after such time that there is an
acquiring person no amendment may adversely affect the interests of the holders of the rights.

Until
a right is exercised, the holder of a right will have no rights by virtue of ownership as a stockholder of the Company, including, without limitation, the right to vote or to
receive dividends.

11. Stock-Based Compensation

1999 Stock Option Plan and 2002 Stock Incentive Plan

On May 13, 1999, the Board of Directors adopted and the stockholders approved the 1999 Stock Option Plan (the "1999 Stock
Plan"). A total of 5,000,000 shares of common stock were reserved for issuance under the 1999 Stock Plan.

On
May 23, 2002, the Board of Directors adopted and the stockholders approved the 2002 Stock Incentive Plan and reserved an additional 10,000,000 shares of common stock for
issuance under this plan. The 2002 Stock Incentive Plan replaced the 1999 Stock Plan and all available shares under the 1999 Stock Plan were transferred to the 2002 Stock Incentive Plan (collectively
the "2002 Stock Plan"), resulting in 15,000,000 common shares reserved for issuance. In addition, the shares under the 2002 Stock Plan increase annually on January 1 of each year equal
to 1% of the total outstanding shares of ValueClick common stock as of the last day of the previous year. As of December 31, 2008, there are 4,821,937 shares available for
future grant.

F-28

---



Table of Contents

The
2002 Stock Plan provides for the granting of non-statutory and incentive stock options and restricted stock awards to, among other parties, employees, officers and
directors of the Company. Stock options granted to new employees or officers generally begin vesting on the new
employee's or officer's first date of employment, and vest over a four-year period, with one-fourth vesting on the first anniversary date and the remainder vesting
pro-rata monthly over the remaining three years, and expire five to ten years from the date of grant. Stock options granted to existing employees or officers typically vest on a monthly
pro-rata basis over a four-year period and expire five to ten years from the date of grant. Stock options granted to directors generally vest over a two-year period
and expire five to ten years from the date of grant. Restricted stock grants generally vest over a four-year period.

Pursuant
to the Company's business combinations with Fastclick, Webclients, HiSpeed Media, Commission Junction, Be Free, and Mediaplex, the Company assumed certain stock options and
related plans. No stock options are available for future grants under these assumed stock plans.

The
following table summarizes stock option activity under the Company's stock plans for the years ended December 31, 2008, 2007, and 2006:

Shares

Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic Value(in years)

(in thousands)Options outstanding at December 31, 2005


9,537,957

$
10.11Granted


1,342,625

$
16.99Exercised


(4,419,809
)
$
6.87Forfeited/expired


(996,485
)
$
14.27Options outstanding at December 31, 2006


5,464,288

$
13.66Granted


6,300,000

$
26.95Exercised


(1,102,184
)
$
12.00Forfeited/expired


(1,536,626
)
$
19.59Options outstanding at December 31, 2007


9,125,478

$
22.04Granted


150,000

$
21.27Exercised


(420,394
)
$
9.48Forfeited/expired


(5,875,317
)
$
26.31Options outstanding at December 31, 2008


2,979,767

$
15.35


4.63

$
924Options vested at December 31, 2008 and expected to vest after December 31, 2008


2,972,474

$
15.34


4.63

$
924Options exercisable at December 31, 2008


2,432,750

$
15.04


4.68

$
924


The
total intrinsic value of stock options exercised during the years ended December 31, 2008, 2007 and 2006 was $2.6 million, $16.9 million and
$54.5 million, respectively. The weighted-average estimated grant date fair value of stock options granted for the years ended December 31, 2008, 2007 and 2006 was $8.89, $10.74 and
$6.93, respectively.

As
of December 31, 2008 and 2007, there were $3.6 million and $59.5 million, respectively, of total unrecognized stock-based compensation related to unvested stock
options. The remaining vesting
period for such unvested stock options ranges up to 4 years, with a weighted-average remaining vesting period of 1.3 years.

F-29

---



Table of Contents

Tender Offer

In September 2008, the Company completed a tender offer process in which it agreed to purchase certain underwater stock options
from eligible employees, officers and directors. Under the terms of the tender offer process, the Company acquired and cancelled 4.8 million outstanding stock options with exercise prices
ranging from $25.66 to $29.73, which resulted in cash payments of $5.0 million. The completed tender offer triggered the acceleration of stock-based compensation resulting in an additional
charge of $33.8 million in the three-month period ended September 30, 2008, which represents the product of the number of unvested stock options purchased times the original
Black-Scholes value that was established for each option on the original grant date.

Restricted Stock

The Company began granting restricted stock awards in 2008. During 2008, the Company granted 2.0 million shares of restricted
stock under the Company's 2002 Stock Incentive Plan to its executive officers, board of directors and certain of its employees. Under the terms of the restricted stock awards, the shares granted
generally vest over a four year period. If the employment of any recipient of a restricted stock grant terminates for any reason, the Company shall automatically reacquire any unvested shares without
cost to the Company.

The
following table summarizes activity for restricted stock awards during the year ended December 31, 2008:

Shares

Weighted-
Average
Grant Date
Fair ValueOutstanding at December 31, 2007




$
Granted


2,028,500

$
11.28Vested


(79,878
)
$
19.33Forfeited


(58,187
)
$
19.33Outstanding at December 31, 2008


1,890,435

$
10.69


At
December 31, 2008, the intrinsic value of outstanding restricted stock awards was $12.9 million. The fair value of restricted stock that vested during the year ended
December 31, 2008 was $508,000. As of December 31, 2008, there was $18.2 million of total unrecognized stock-based compensation related to unvested restricted stock awards. The
weighted-average remaining vesting period is 3.7 years for these awards.

Employee Stock Purchase Plan

The Company commenced its Employee Stock Purchase Plan ("the Purchase Plan") in September 2007, which allows employees to
purchase shares of the Company's common stock through payroll deductions of up to 10 percent of their annual, eligible compensation subject to certain Internal Revenue Code and Purchase Plan
limitations. The Purchase Plan provides for the issuance of a cumulative maximum of 1.5 million shares of common stock. The price of common stock purchased under the Purchase Plan is equal to
85 percent of the lower of the fair market value of the common stock on the commencement date of each twelve-month offering period or the specified purchase date. For the year ended
December 31, 2008, 215,000 shares were purchased. No shares were purchased for the year ended December 31, 2007. For the years ended December 31, 2008 and 2007, stock-based
compensation recognized under the Purchase Plan was $1.1 million and $394,000, respectively. As of December 31, 2008, there was $698,000 of unrecognized compensation cost related to the
Purchase Plan which is expected to be recognized over a weighted average period of approximately five months.

F-30

---



Table of Contents

Stock Appreciation Rights Plan

In October 2005, the Company issued 311,000 share-equivalent Stock Appreciation Rights ("SARs") to certain former
employees of Fastclick. The purpose of the SARs was to provide certain individuals with an inducement to remain with the combined organization subsequent to the acquisition date. The SARs vested over
either a four- or eight-quarter period beginning October 1, 2005. The intrinsic value of the SARs that vested each quarter was settled in cash the following quarter. The SARs were classified as
liability awards in accordance with SFAS 123(R). As of December 31, 2007, all SARs were fully vested and paid. No SARs have been issued subsequent to October 2005.

Valuation and Expense Information under SFAS 123(R)

For the years ended December 31, 2008, 2007 and 2006, the Company recognized stock-based compensation of $52.5 million,
$18.3 million and $11.9 million, respectively, in continuing operations. The following table summarizes, by consolidated statement of operations line item the impact of stock-based
compensation and the related income tax benefits recognized for the years ended December 31, 2008, 2007 and 2006, (in thousands):

Year Ended
December 31,
2008

Year Ended
December 31,
2007

Year Ended
December 31,
2006Sales and marketing

$
16,196

$
4,964

$
4,394General and administrative


31,154


10,930


5,247Technology


5,133


2,397


2,226Stock-based compensation


52,483


18,291


11,867Related income tax benefits


(19,739
)

(6,748
)

(3,980
)Stock-based compensation, net of tax benefits

$
32,744

$
11,543

$
7,887


The
Company has not capitalized as an asset any stock-based compensation for the years ended December 31, 2008, 2007 and 2006.

SFAS 123(R)
requires cash flows resulting from excess tax benefits to be classified as a financing activity. Excess tax benefits are realized tax benefits from tax deductions for
exercised stock options in excess of the deferred tax asset attributable to the recognized stock-based compensation for such stock options. Pursuant to the requirements of SFAS 123(R),
$599,000, $4.5 million and $18.6 million of excess tax benefits for the years ended December 31, 2008, 2007 and 2006, respectively, have been classified as a financing activity in
the consolidated statements of cash flows.

F-31

---



Table of Contents

The Company calculated the estimated fair value of its stock options and Employee Stock Purchase Plan awards on the date of grant using the Black-Scholes
option-pricing model and the following weighted-average assumptions:

Stock OptionsYear Ended December 31,2008

2007

2006Risk-free interest rates


2.4
%

4.5
%

4.7
%Expected lives (in years)


3.6


3.6


3.6Dividend yield


0
%

0
%

0
%Expected volatility


55
%

48
%

49
%




Employee Stock
Purchase PlanYear Ended December 31,2008

2007

2006Risk-free interest rates


2.0
%

4.5
%

Expected lives (in years)


0.7


0.7


Dividend yield


0
%

0
%

Expected volatility


57
%

51
%




The
Company's computation of expected volatility for the years ended December 31, 2008, 2007 and 2006 was based on a combination of historical and market-based implied volatility
from traded options on the Company's common stock. The Company estimated the expected life of each stock option granted in 2008, 2007 and 2006 using the short-cut method permissible under
SAB 107, which utilizes the weighted-average expected life of each tranche of the granted stock option, which was determined based on the sum of each tranche's vesting period plus
one-half of the period from the vesting date of each tranche to its expiration. The expected life of options granted under the Purchase Plan represents the weighted-average amount of time
remaining in the twelve-month offering period. The risk-free interest rate is based on the implied yield available on U.S. Treasury securities with an equivalent
remaining term.

F-32

---



Table of Contents

12. Net Income Per Common Share

The following table sets forth the computation of basic and diluted net income per common share for the periods indicated
(in thousands, except per share data):

Year Ended December 31,2008

2007

2006Numerator:(Loss) income from continuing operations

$
(218,488
)
$
70,348

$
62,171Income from discontinued operations


4,376


264


403Net (loss) income

$
(214,112
)
$
70,612

$
62,574Denominator:Denominator for basic calculationweighted-average common shares


92,325


99,224


99,600Weighted-average effect of dilutive securities





1,294


2,121Denominator for diluted calculation


92,325


100,518


101,721Net income per common share:Basic (loss) income from continuing operations

$
(2.37
)
$
0.71

$
0.62Basic income from discontinued operations


0.05





0.01Basic net (loss) income

$
(2.32
)
$
0.71

$
0.63Diluted (loss) income from continuing operations

$
(2.37
)
$
0.70

$
0.61Diluted income from discontinued operations


0.05





0.01Diluted net (loss) income

$
(2.32
)
$
0.70

$
0.62


The
diluted net income per common share computations exclude common stock options which were anti-dilutive as a result of their exercise price being greater than the average
market price of the Company's common stock for the years ended December 31, 2007 and 2006. No stock options, restricted stock and shares issuable under the Purchase Plan were included in the
denominator for the diluted calculation for the year ended December 31, 2008 as the Company recognized a loss from continuing operations and, therefore, inclusion of these shares would be
anti-dilutive to the Company's loss per share. The number of weighted-average shares excluded from the diluted net income per common share computation was 6.4 million,
4.2 million and 2.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

13. Defined Contribution Plans

Prior to 2006, the Company had various savings plans (the "Savings Plans") that qualified as defined contribution plans under
Section 401(k) of the Internal Revenue Code. In 2006, the Savings Plans were consolidated into one savings plan (the "Master Savings Plan"), which also qualifies as a defined
contribution plan under Section 401(k) of the Internal Revenue Code. Under the Master Savings Plan, participating employees may defer a percentage of their eligible pre-tax earnings
up to the Internal Revenue Service's annual contribution limit. All full-time domestic employees of the Company are eligible to participate in the Master Savings Plan. The Master Savings
Plan does not permit investment of participant contributions in the Company's common stock. Company matching contributions to the Master Savings Plan is discretionary. Company contributions to the
Master Savings Plan amounted to $875,000, $649,000 and $418,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

F-33

---



Table of Contents

14. Related Party Transactions

For the year ended December 31, 2008, the Company recorded advertising costs totaling $1.2 million paid to
Acquisis LLC, of which a member of the Company's board of directors is the managing partner and greater than 5% owner. Acquisis LLC became a related party during the three-month period
ended September 30, 2007. For the six months ended December 31, 2007, the Company recorded advertising costs totaling $313,000. The Company had an outstanding amount due to this entity
of $131,000 and $133,000 as of December 31, 2008 and 2007, respectively, which is reflected in accounts payable and accrued expenses.

15. Line of Credit

In November 2008, the Company obtained a line of credit with a bank group (the "Credit Agreement") which allows for borrowings
of up to $100 million through November 14, 2011. Advances under this agreement bear interest at either (i) the base rate, which is equal to the highest of (a) the lender's
prime rate, (b) the federal funds rate plus 1.50%, and (c) the one month reserve adjusted daily London Interbank Offered Rate ("LIBOR") plus 1.50%, or (ii) the LIBOR rate plus an
applicable margin as in effect at each interest calculation date. The applicable margin in effect from time to time is based on the Company's total leverage ratio. The applicable margins range from
0.50% to 1.25% for base rate loans and from 1.50% to 2.25% for LIBOR loans. Accrued interest on borrowings are due on the last business day of each fiscal quarter for base rate loans, or in the
case of a LIBOR Loan, on the last day of each interest period (and, if any such interest period is longer than three months, every three months after the first day of such interest period). All
principal amounts are due on the maturity date.

Certain
of the Company's domestic subsidiaries have guaranteed the obligations of the Company and all future domestic subsidiaries of the Company also are required to guarantee the
obligations of the Company under the credit agreement. The Company's obligations are secured by a lien on substantially all of its present and future assets pursuant to a separate security agreement
(the "Security Agreement"). In addition, the obligations of each subsidiary guarantor are secured by a lien on substantially all of such subsidiary's present and future assets. The subsidiary
guarantees and the collateral under the Security Agreement are subject to release upon fulfillment of certain conditions specified in the Credit Agreement, Security Agreement and subsidiary guaranty
agreement.

The
revolving credit facility is available to be used by the Company, among other things, to fund its working capital needs and for other general corporate purposes, including
acquisitions and stock repurchases. The Company will pay a commitment fee on unused amounts that ranges, based on the Company's total leverage ratio, from 0.25% to 0.40% of the unused portion of the
revolving credit facility. The agreement also contains customary events of default such as failure to pay interest or principal when due, material inaccuracy of representations or warranties,
bankruptcy events, change of
control, a material adverse change in financial condition or operations, or a default of covenant. Upon the occurrence of an event of default, the principal and accrued interest under the revolving
credit facility then outstanding may be declared due and payable. At December 31, 2008, no amount was outstanding on this line of credit.

The
Company has provided various representations and agreed to certain financial covenants including a total leverage ratio, minimum trailing-twelve month EBITDA and minimum
unrestricted, unencumbered liquid asset requirements. At December 31, 2008, the Company was in compliance with all of the financial covenants of the line of credit agreement.

F-34

---



Table of Contents

16. Commitments and Contingencies

Leases

Future minimum lease payments as of December 31, 2008 under noncancellable operating leases, and related sublease income, with
initial lease terms in excess of one year, for the next five years and thereafter are as follows (in thousands):

Year Ending December 31:

Operating
Lease
Commitments

Operating
Sublease
Income2009

$
6,508

$
(434
)2010


4,825


(277
)2011


2,728


(89
)2012


1,560


2013


553


Thereafter


15


Total minimum lease payments

$
16,189

$
(800
)


Operating
leases consist primarily of facility leases. Certain of the Company's operating leases include escalation clauses that periodically adjust rental expense to reflect changes in
price indices. The Company records rent expense on a straight-line basis over the lease term.

Total
rent expense under operating leases, net of sublease income, was $7.0 million, $5.4 million and $4.8 million for the years ended December 31, 2008, 2007
and 2006, respectively.

As
of December 31, 2008, the Company had the following purchase obligations (in thousands):

Payments due by periodTotal

Less than
1 year

1 to less
than
3 years

3 to less
than
5 years

More
than
5 yearsPurchase obligations

$
3,670

$
3,625

$
37

$
8

$



Purchase
obligations include agreements to purchase goods or services that are enforceable, legally binding and specify all significant terms. Purchase obligations exclude agreements
that are cancelable without penalty.

Standby
letters of credit are maintained pursuant to certain of the Company's lease agreements. The standby letters of credit remain in effect at declining levels through the terms of
the related leases. Certificates of deposit of $500,000 maintained by the Company in connection with certain of these standby letters of credit are included in cash and cash equivalents as of
December 31, 2008 and 2007. Commitments under standby letters of credit as of December 31, 2008 are scheduled to expire as follows (in thousands):

Total

Less than
1 year

1 to less
than
3 years

3 to less
than
5 years

More
than
5 yearsStandby letters of credit

$
543




$
543








Other Commitments

In the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors,
business partners, and other parties with respect to certain

F-35

---



Table of Contents

matters,
including, but not limited to, losses arising out of the Company's breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by
third parties. In addition, the Company has entered into indemnification agreements with its directors and certain of its officers and employees that will require the Company, among other things, to
indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. The Company has also agreed to indemnify certain former officers,
directors and employees of acquired companies in connection with the acquisition of such companies. The Company maintains director and officer insurance, which may cover certain liabilities arising
from its obligation to indemnify its directors and certain of its officers and employees, and former officers, directors and employees of acquired companies, in certain circumstances.

It
is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique
facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses.

Legal Action

On May 16, 2007, the Company received a letter from the Federal Trade Commission ("FTC") stating that the FTC was conducting an
inquiry to determine whether the Company's lead generation activities violate either the Federal Trade Commission Act ("FTC Act") or the CAN-SPAM Act. Specifically, the FTC
investigated certain ValueClick websites which promise consumers a free gift of substantial value, and the manner in which the Company drives traffic to such websites, in particular through email. In
the first quarter of 2008, without admitting any wrongdoing, the Company and the FTC agreed to a stipulated injunction to resolve this matter. The agreement is subject to Department of Justice and
presiding court approval. The terms of the stipulated injunction include the payment of $2.9 million as well as guidelines under which the Company has agreed to operate its promotional lead
generation activities. The Company recorded the settlement payment associated with the stipulated injunction under general and administrative expense in its consolidated financial statements for the
year ended December 31, 2007. The agreement between the Company and the FTC is for settlement purposes only, and did not constitute an admission by the Company that a law was violated or that
the facts as alleged in the FTC's complaint were true.

On
November 20, 2007, the United States District Court for the Central District of California consolidated two purported securities fraud class action lawsuits brought
against the Company, its executive chairman and its former chief administrative officer. The court appointed the combined funds of Laborers' International Union of North America National (Industrial)
Pension and the LIUNA Staff & Affiliates Pension Fund (collectively, the "LIUNA Funds") as lead plaintiffs. In January, the LIUNA Funds filed a consolidated complaint alleging violations of
certain federal securities laws based upon the Company's and the Company's officers' alleged materially false and misleading statements concerning the Company's compliance with laws and standards
applicable to its lead generation business, among other things. The LIUNA Funds purport to represent all persons who purchased or otherwise acquired the common stock of the Company between
June 13, 2005 and July 27, 2007, and seek class certification, damages, costs incurred in bringing suit, and equitable/injunctive relief. The Company filed a motion to dismiss this
matter in March 2008 and on September 25, 2008, the Court granted defendants' motion to dismiss. After having their first complaint dismissed by the Court, the LIUNA Funds filed their
First Amended Consolidated Complaint on November 24, 2008. The Company has filed a motion to dismiss this complaint and that motion is set to be heard by the Court on April 20, 2009. The
Company anticipates defending this action vigorously.

On
October 31, 2007, plaintiff Susan Lacerenza, a ValueClick shareholder who previously had filed a derivative action in Los Angeles County Superior Court, dismissed that action
and re-filed her complaint in the United States District Court for the Central District of California. The operative

F-36

---



Table of Contents

complaint,
brought against nominal defendant ValueClick, Inc. and against individual ValueClick directors and executives (collectively with ValueClick, the "Defendants"), alleges violations of
certain federal securities laws, breaches of fiduciary duty, insider trading, and unjust enrichment. The
allegations arose from the plaintiff's claim that ValueClick engaged in illegal and deceptive practices with respect to its lead generation business and that the individual Defendants knowingly
disseminated false and misleading financial results. Plaintiff seeks to recoup allegedly improper profits from the individual Defendants and also seeks damages against the individual Defendants for
harm allegedly caused to ValueClick. In January 2008, the Company filed a motion to dismiss this matter. Rather than oppose that motion, the plaintiff filed a First Amended Complaint. In
February 2008, upon stipulation of the parties, the Court stayed this action in light of the pending federal class action. The Company intends to defend itself vigorously against these and
related allegations.

The
ultimate resolution of these two matters, which is expected to occur within one year, could result in a loss that is greater than the amount accrued at December 31, 2008. The
Company has insurance coverage, which has been acknowledged by the carrier, that it believes is sufficient to cover the unaccrued exposure related to the above two matters. Accordingly, the Company
does not currently believe the outcome of these matters will have a material impact on its future consolidated results of operations, financial position or cash flows.

On
April 8, 2008, Hypertouch, Inc. filed an action in the Superior Court of California, County of Los Angeles, against the Company. The complaint asserts causes of action
for violation of California Business & Professions Code §§ 17529.5 and 17200, et seq., arising from the plaintiff's alleged receipt of a large number of email
messages allegedly transmitted by the Company "and/or its agents" and seeks statutory damages for each such email. The Company filed its answer to the complaint on May 28, 2008. The Company is
defending this case vigorously and is currently engaged in active discovery. On February 18, 2009, the Company filed a motion for summary judgment seeking dismissal of each of the plaintiff's
claims on several independent grounds. The Company does not currently believe the outcome of this matter will have a material impact on its future consolidated results of operations, financial
position or cash flows.

From
time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. In addition, the Company may receive letters
alleging infringement of patent or other intellectual property rights. The Company is not currently a party to any material legal proceedings, except as discussed above, nor is the Company aware of
any pending or threatened litigation that would have a material adverse effect on the Company's business, operating results, cash flows or financial condition should such litigation be resolved
unfavorably.

17. Segments and Geographic Information

The Company derives its revenue from four business segments. These business segments are presented on a worldwide basis and include:
Media, Affiliate Marketing, Comparison Shopping & Search, and Technology. In the second quarter of 2008, the Company changed its internal reporting structure which resulted in changes in the
Company's reportable segments to include the Company's Search 123 product (which was previously included in the Affiliate Marketing segment) with the Comparison Shopping segment (renamed
"Comparison Shopping & Search") in order to present search traffic-based businesses in one segment, to be consistent with the manner in which the Company operates after the internal structural
change. In accordance with SFAS No.131, "Disclosures about Segments of an Enterprise and Related Information", all prior period segment information has been revised to conform to the new
segment presentation. The following table provides revenue, segment income from operations and total assets for each of the Company's four business segments. Segment income from operations, as shown
below, excludes the effects of: stock-based compensation; amortization of intangible assets; impairment of goodwill and intangible assets; and corporate expenses as these items are excluded from the
segment performance measures utilized by the Company's chief

F-37

---



Table of Contents

operating
decision maker in evaluating the performance of the segments. Corporate expenses consist of those costs not directly attributable to a business segment, and include: salaries and benefits
for the Company's executive, finance, legal, corporate governance, human resources, and facilities organizations; fees for professional service providers including audit, legal, tax, and
Sarbanes-Oxley compliance; insurance; and, other corporate expenses.

Revenue

Segment Income from Operations

Total Assets2008

2007

2006

2008

2007

2006

2008

2007(in thousands)Media

$
301,256

$
366,312

$
353,281

$
73,182

$
86,849

$
92,156

$
98,731

$
404,436Affiliate Marketing


121,972


115,977


98,569


59,455


63,201


55,680


322,247


277,187Comparison Shopping & Search


177,145


112,706


39,765


40,932


22,507


5,302


121,929


289,686Technology


28,670


23,741


18,778


13,600


10,537


6,616


60,372


39,713Inter-segment revenue


(3,237
)

(2,228
)

(1,285
)













Total

$
625,806

$
616,508

$
509,108

$
187,169

$
183,094

$
159,754

$
603,279

$
1,011,022


A reconciliation of segment income from operations to consolidated income from operations is as follows for each period (in thousands):

Segment Income from Operations2008

2007

2006Segment income from operations

$
187,169

$
183,094

$
159,754Corporate expenses


(31,436
)

(30,288
)

(26,932
)Stock-based compensation


(52,483
)

(18,291
)

(11,867
)Amortization of intangible assets


(28,882
)

(24,745
)

(19,490
)Impairment of goodwill and intangible assets


(322,000
)




Consolidated income (loss) from operations

$
(247,632
)
$
109,770

$
101,465


Depreciation
and amortization expense included in the determination of segment income from operations as presented above for the Media, Affiliate Marketing, Comparison Shopping &
Search, and Technology segments was $3.5 million, $1.8 million, $2.0 million, and $935,000, respectively, for the year ended December 31, 2008; $3.3 million,
$2.0 million, $1.7 million, and $1.5 million, respectively, for the year ended December 31, 2007; and, $3.1 million, $2.4 million, $1.2 million, and
$1.6 million, respectively, for the year ended December 31, 2006. Depreciation and amortization expense included in corporate expenses in the determination of consolidated income from
operations was $1.4 million, $907,000 and $622,000 for the years ended December 31, 2008, 2007 and 2006, respectively.

The
Company's operations are domiciled in the United States with operations in Europe, China and Japan through wholly-owned subsidiaries. Revenue is attributed to individual
countries based upon the country in which the customer relationship is maintained. The Company's operations in China primarily support the revenue generated in the United States, and therefore,
the costs associated with these operations are attributed to the United States in the determination of geographic income from operations shown below. Geographic long-lived assets
exclude deferred tax assets and other assets in the Company's consolidated balance sheets.

F-38

---



Table of Contents

The
Company's geographic information was as follows (in thousands):

Year Ended
December 31, 2008Revenue

Income from
Operations

Long-lived
Assets at
December 31,
2008United States

$
521,498

$
(251,627
)
$
241,826International


111,381


3,995


26,313Inter-regional eliminations


(7,073
)




Total

$
625,806

$
(247,632
)
$
268,139


Year Ended
December 31, 2007Revenue

Income from
Operations

Long-lived
Assets at
December 31,
2007United States

$
526,923

$
101,164

$
528,639International


100,818


8,606


43,229Inter-regional eliminations


(11,233
)




Total

$
616,508

$
109,770

$
571,868


Year Ended
December 31, 2006Revenue

Income (Loss)
from
Operations

Long-lived
Assets at
December 31,
2006United States

$
450,266

$
95,321

$
342,313International


69,740


6,144


46,135Inter-regional eliminations


(10,898
)




Total

$
509,108

$
101,465

$
388,448


F-39

---





Table of Contents

SCHEDULE II

VALUECLICK, INC.        VALUATION AND QUALIFYING ACCOUNTS  (in thousands)

Balance at
Beginning of
Period

Additions
Charged To
Expense/
Against
Revenue

Other
Adjustments(2)

Deductions

Balance at
End of PeriodAllowance for doubtful accounts and sales credits(1):Year ended December 31, 2008

$
6,535

$
7,212

$
37

$
(7,898
)
$
5,886Year ended December 31, 2007

$
4,124

$
7,762

$
31

$
(5,382
)
$
6,535Year ended December 31, 2006

$
4,692

$
4,818

$


$
(5,386
)
$
4,124


---

F-40

---





Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this annual report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Westlake Village, State of California, on the
27th day of February, 2009.

VALUECLICK, INC.By:

/s/ TOM A. VADNAIS Tom A. Vadnais Chief Executive Officer


POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, the undersigned hereby constitute and appoint each of Tom A. Vadnais and John Pitstick their true and
lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign any and
all amendments to this annual report on Form 10-K, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in
connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his
respective substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated:

Signature

Title

Date/s/ TOM A. VADNAIS Tom A. Vadnais

Director and
Chief Executive Officer
(Principal Executive Officer)

February 27, 2009/s/ JOHN PITSTICK John Pitstick

Chief Financial Officer
(Principal Financial and Accounting Officer)

February 27, 2009/s/ JAMES R. ZARLEY James R. Zarley

Chairman of the Board of Directors

February 27, 2009/s/ DAVID S. BUZBY David S. Buzby

Director

February 27, 2009/s/ MARTIN T. HART Martin T. Hart

Director

February 27, 2009/s/ JEFFREY F. RAYPORT Jeffrey F. Rayport

Director

February 27, 2009/s/ JAMES A. CROUTHAMEL James A. Crouthamel

Director

February 27, 2009/s/ JAMES R. PETERS James R. Peters

Director

February 27, 2009


---



QuickLinks